Location via proxy:   [ UP ]  
[Report a bug]   [Manage cookies]                
Scribd Logo
Upload

Welcome to Scribd!

  • 692 views

    Accounting - Prob.3

    Uploaded by

    Dellosa, Jierstine Shaney R.
    Shark Company sold $1.5 million in accounts receivable for $1.39 million in cash to obtain funds for operations. It then assigned the remaining $5 million in accounts receivable as collateral for a $2.5 million loan, receiving $2.45 million after fees. By year-end, none of the assigned accounts had been collected. The company estimates 10% of accounts will prove uncollectible.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Accounting - Prob.3

    Uploaded by

    Dellosa, Jierstine Shaney R.
    692 views2 pages
    Shark Company sold $1.5 million in accounts receivable for $1.39 million in cash to obtain funds for operations. It then assigned the remaining $5 million in accounts receivable as collateral for a $2.5 million loan, receiving $2.45 million after fees. By year-end, none of the assigned accounts had been collected. The company estimates 10% of accounts will prove uncollectible.

    Original Title

    Accounting- Prob.3

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Shark Company sold $1.5 million in accounts receivable for $1.39 million in cash to obtain funds for operations. It then assigned the remaining $5 million in accounts receivable as collateral for a $2.5 million loan, receiving $2.45 million after fees. By year-end, none of the assigned accounts had been collected. The company estimates 10% of accounts will prove uncollectible.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    692 views2 pages

    Accounting - Prob.3

    Uploaded by

    Dellosa, Jierstine Shaney R.
    Shark Company sold $1.5 million in accounts receivable for $1.39 million in cash to obtain funds for operations. It then assigned the remaining $5 million in accounts receivable as collateral for a $2.5 million loan, receiving $2.45 million after fees. By year-end, none of the assigned accounts had been collected. The company estimates 10% of accounts will prove uncollectible.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Problem 21- II (IAA)

    During the second year of operations. Shark Company found itself in financial difficulties. The entity decided to
    use the accounts receivable as a means of obtaining cash to continue operations. On July 1, 2016, the entity sold
    P 1,500,000 of accounts receivable for cash proceeds od P1,390,000. No bad debt allowance was associated
    with these accounts. On December 15, 2016, the entity assigned the remainder of its accounts receivable,
    P5,000,000 as of that date, as collateral on a P2,500,000, 12% annual interest rate loan from Finance Company.
    The entity received P2,500,000 less a 2% finance charge. None of the assigned accounts had been collected by
    the end of the year. It is estimated that 10 % of accounts receivable would be uncollectible.

    The entity revealed the following data on December 31, 2016:

    Accounts receivable, excluding factored and assigned accounts 1,000,000

    Accounts receivable—assigned 5,000,000

    Accounts receivable—factored 1,500,000

    Allowance for bad debts before adjustment 100,000

    1. What total amount should be reported as accounts receivable on December 31, 2016?

    a. 7,500,000

    b. 6,000,000

    c. 5,000,000

    d. 1,000,000

    Computation:

    Assigned account receivable P5,000,000

    Add: Unassigned account receivable -0-

    12/31/2016/ Account receivable P5,000,000

    2. What amount should be recognized as bad debts expense for 2016?

    a. 600,000

    b. 500,000

    c. 650,000

    d. 0
    Computation:

    Allowance for bad debts expense prior adjustment P100,000

    Add: Required allowance for the year (5,000,000 ×10%) 500,000

    Bad debts expenses P600,000

    You might also like