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    Morale Company Provided The Following Transactions:: University - Year 2 Accounting

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    collegestudent2000
    Morale Company had the following transactions with a customer: 1) A sale on credit for P2,050,000 on March 14. 2) Receipt of a 60-day, 12% note for P2,000,000 on April 7 to settle the account receivable. 3) Discounting of the note with a bank on April 20 for P2,001,750, recognizing a P8,250 loss. 4) Notification on June 4 that the note was dishonored, paying the bank P2,000,000 plus P10,000 in fees. 5) Receipt of P2,070,000 cash from the customer on July 4 to settle the

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    Morale Company Provided The Following Transactions:: University - Year 2 Accounting

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    collegestudent2000
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    Morale Company had the following transactions with a customer: 1) A sale on credit for P2,050,000 on March 14. 2) Receipt of a 60-day, 12% note for P2,000,000 on April 7 to settle the account receivable. 3) Discounting of the note with a bank on April 20 for P2,001,750, recognizing a P8,250 loss. 4) Notification on June 4 that the note was dishonored, paying the bank P2,000,000 plus P10,000 in fees. 5) Receipt of P2,070,000 cash from the customer on July 4 to settle the

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    This document contains exercises on Intermediate Accounting.

    Original Title

    0201 Accounting (15)

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    Morale Company had the following transactions with a customer: 1) A sale on credit for P2,050,000 on March 14. 2) Receipt of a 60-day, 12% note for P2,000,000 on April 7 to settle the account receivable. 3) Discounting of the note with a bank on April 20 for P2,001,750, recognizing a P8,250 loss. 4) Notification on June 4 that the note was dishonored, paying the bank P2,000,000 plus P10,000 in fees. 5) Receipt of P2,070,000 cash from the customer on July 4 to settle the

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    50 views2 pages

    Morale Company Provided The Following Transactions:: University - Year 2 Accounting

    Uploaded by

    collegestudent2000
    Morale Company had the following transactions with a customer: 1) A sale on credit for P2,050,000 on March 14. 2) Receipt of a 60-day, 12% note for P2,000,000 on April 7 to settle the account receivable. 3) Discounting of the note with a bank on April 20 for P2,001,750, recognizing a P8,250 loss. 4) Notification on June 4 that the note was dishonored, paying the bank P2,000,000 plus P10,000 in fees. 5) Receipt of P2,070,000 cash from the customer on July 4 to settle the

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    of 2

    University - Year 2

    Accounting

    EXERCISE 8 Morale Company provided the following transactions:

    MAR 14 Sale of merchandise, P2,050,000 to a customer, FOB destination 2 / 10, n


    / 30.
    Accounts receivable 2,050,000
    Sales 2,050,000
    APR 7 Receipt of a 60-day, 12% note dated April 5 from the customer. The face
    of the note was the amount of the invoice minus freight charge of
    P50,000 paid by the customer in connection with the March 14 sale.
    Notes receivable 2,000,000
    Freight out 50,000
    Accounts receivable 2,050,000
    APR 20 The note of the customer was discounted with the bank at 15%.
    Apr-20 Cash 2,001,750
    Loss on
    discounting 8,250
    Notes receivable discounted 2,000,000
    Interest income 10,000
    Principal 2,000,000
    Add: Interest (2,000,000 x 12% x 60/360) 40,000
    Maturity value 2,040,000
    Less: Discount (2,040,000 x 15% x 45/360) - 38,250
    Net proceeds 2,001,750

    Principal 2,000,000
    Accrued interest receivable (2,000,000 x 12% x
    15/360) 10,000
    Carrying amount of N/R 2,010,000

    Net proceeds 2,001,750


    Loss: Carrying amount of N/R -2,010,000
    Loss on discounting -8,250
    JUN 4 Receipt of notification from bank that the customer dishonored the note.
    Accordingly, the entity paid the bank the amount due including protest fee
    and other charges of P10,000.
    Accounts receivable (2,040,000 2,050,00
    Jun-04 +10,000) 0
    2,050,00
    Cash 0
    2,000,00
    Notes receivable discounted 0
    2,000,00
    Notes receivable 0
    JUL 4 Receipt of cash from the customer for the full amount of indebtedness plus
    interest on the original face value.
    Jul-04 Cash 2,070,000
    Accounts receivable 2,050,000
    Interest income (2,000,000 x 12% x 30/360) 20,000
    Required: Prepare journal entries to record the transactions assuming any discounting
    of note receivable is accounted for as a conditional sale with recognition of
    a contingent liability.

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