Ch 3 Answers fin acc 1

CHAPTER 3 - RECEIVABLES 3-1. a. b. c. d. e. f. g. h. i. j. k. l. m. n. o. p. 3-2.

Accounts Receivable Receivables from Employees (part of non-trade receivables) – current assets Advances to Suppliers – Current assets or deduction from Accounts Payable to the same supplier Accounts Receivable Customers’ Accounts with Credit Balances – Current Liabilities Cost of merchandise must be included in inventories Accounts Receivable Subscriptions Receivable – current asset if collectible within 12 months; otherwise, noncurrent asset or deduction from Shareholders’ Equity Other Non-Trade Receivables – Current asset or non-current asset depending on terms of payment Advances to Suppliers – Current Assets Suppliers’ Accounts with Debit Balances or Advances to Suppliers – Current assets Accounts Receivable Claims for Income Tax Refund – Current Assets Accounts Receivable, amount of loan presented separately as part of liabilities Accounts Receivable Not recognized anymore (for write off)

(Ginoo Company) Gross Method Dec. 9 Accounts Receivable-First Lady Sales 80,000 x 90% x 95% 10 19

26 31 2014

Jan. 5

9

19

68,400

Accounts Receivable-Men’s World Sales

50,000

Cash Sales Discounts Accounts Receivable-First Lady

67,032 1,368

Accounts Receivable-Teens’ Kingdom Sales

40,000

Sales Discounts Allowance for Sales Discounts

50,000

68,400 40,000 800 800

Cash Allowance for Sales Discounts Accounts Receivable-Teens’ Kingdom

39,200 800

Cash Accounts Receivable-Men’s World

50,000

Net Method Dec. 9 Accounts Receivable-First Lady Sales 68,400 x .0.98 10

68,400

40,000 50,000 67,032 67,032

Accounts Receivable-Men’s World Sales

49,000

Cash Accounts Receivable-First Lady

67,032

49,000 67,032

Chapter 3 – Receivables Dec. 26 31 2014

Jan. 5 9

Accounts Receivable-Teens’ Kingdom Sales Accounts Receivable-Men’s World Sales Discount Forfeited

Dec. 19

26

31

39,200 1,000 1,000

Cash Accounts Receivable – Teens’ Kingdom

39,200

Cash Accounts Receivable-Men’s World

50,000

Allowance Method Dec. 9 Accounts Receivable-First Lady Allowance for Sales Discount Sales 10

39,200

39,200 50,000 68,400 1,368 67,032

Accounts Receivable-Men’s World Allowance for Sales Discount Sales

50,000

Cash Allowance for Sales Discount Accounts Receivable-First Lady

67,032 1,368

Accounts Receivable-Teens’ Kingdom Allowance for Sales Discount Sales

40,000

Allowance for Sales Discount Sales Discount Forfeited

1,000 49,000

68,400 800 39,200 1,000 1,000

2014

Jan. 5

9

3-3.

Cash Allowance for Sales Discount Accounts Receivable-Teens’ Kingdom

39,200 800

Cash Accounts Receivable-Men’s World

50,000

(Colleco Supermarket) June 1- Accounts Receivable – Citibank 30 Cash Accounts Receivable – Metrobank Credit Card Service Charges Sales Cash

40,000 50,000

2,450,000 1,764,000 1,470,000 116,000 5,800,000 3,234,000

Accounts Receivable - Citibank Accounts Receivable - Metrobank 3-4.

(Colayco Company) (1) July 14 Allowance for Doubtful Accounts Accounts Receivable-Moret Co. 31

Notes Receivable Sales

2,156,000 1,078,000

10,000 10,000 12,000 12,000

13

Chapter 3 – Receivables Aug. 15

Nov.

1

Nov. 4

5 Nov. 9

Nov. 15 15 Dec. 13

3-5.

Cash Notes Receivable Sales

20,000 15,000

Cash Credit Card Service Charge Sales 4% x 20,000 = 800

19,200 800

Accounts Receivable-P. Noval Notes Receivable Interest Revenue 12,000 x .10 x 90/360 = 300

12,300

35,000

20,000

12,000 300

Accounts Receivable-Credit Card Sales

9,000

Cash Credit Card Service Charge Accounts Receivable-Credit Card 5% x 9,000 = 450

8,550 450

9,000

9,000

Accounts Receivable-Moret Co. Allowance for Bad Debts

10,000

Cash Accounts Receivable-Moret Co.

10,000

Cash Notes Receivable Interest Revenue 15,000 x 12% x 120/360 = 600

15,600

10,000 10,000 15,000 600

(Format Company) a.

b.

Carrying value of the note on January 1, 2013 P6,000,000 x 0.6575 Prevailing interest rate Interest revenue for 2013

P3,945,000 15% P 591,750

Carrying value, January 1, 2013 Add amortization of discount during 2013 Carrying value, December 31, 2013

P3,945,000 591,750 P4,536,750

(or simply P3,945,000 x 1.15 = P4,536,750) 3-6.

(Formatted Company) a.

b.

Carrying value of the note on January 1, 2013 (P2 M x 2.2832) Interest rate Interest revenue for 2013

P4,566,400 15% P 684,960

Carrying value, December 31, 2013 4,566,400 + 684,960 – 2,000,000 Interest rate Interest revenue for 2014

P3,251,360 15% P 487,704

Carrying value, January 1, 2013 Add amortization of discount during 2012 Less first payment of principal Carrying value, December 31, 2012

P4,566,400 684,960 (2,000,000) P3,251,360

14

Chapter 3 – Receivables 3-7.

3- 8.

(HRV Company) (a)

September 30, 2014 (1,000,000)+(3,000,000 x 12%) September 30, 2015 (1,000,000)+(2,000,000 x 12%) September 30, 2016 (1,000,000)+(1,000,000 x 12%)

P1,360,000 P1,240,000 P1,120,000

(b)

January 1 – September 30, 2014 (260,000 x 9/12) October 1 – December 31, 2014 (240,000 x 3/12) Total interest revenue for 2014

P 270,000 60,000 P 330,000

(c)

As of December 31, 2013 Notes receivable Interest receivable (360,000 x 3/12)

Non-current P2,000,000

Current P1,000,000 90,000

(Pinky Pop Company) The note is interest-bearing, but the rate of interest of the note (5%) is unreasonably lower than the prevailing rate (10%) for similar obligation. The present value of the note is determined as follows: 2.5 M + (5% x 7.5 M) 2,875,000 x 0.9091 P2,613,663 2.5 M + (5% x 5.0 M) = 2,750,000 x 0.8264 2,272,600 2.5 M + (5% x 2.5 M) = 2,625,000 x 0.7513 1,972,163 Total P6,858,426 or

2.5 M x 2.4869 (5% x 7.5 M) x 0.9091 (5% x 5.0 M) x 0.8264 (5% x 2.5 M) x 0.7513 Total

(a)

Amortization Table Payment of Interest Date Principal Paid 01/01/13 12/31/13 2,500,000 375,000 12/31/14 2,500,000 250,000 12/31/15 2,500,000 125,000 *difference is due to rounding off

(b)

P6,217,250 340,913 206,600 93,913 P6,858,676 Interest Revenue 685,843 466,927 238,804*

Amortization of Discount 310,843 216,927 113,804*

Carrying Value 6,858,426 4,669,269 2,386,196 ------------

Journal entries

2013

Jan. 1

Dec. 31

2014

Dec. 31

2015

Dec. 31

Notes Receivable Discount on Notes Receivable Gain on Sale of Land Land 7,500,000 – 6,858,426 = 641,574 Discount 6,858,426 – 6,000,000 = 858,426 Gain

7,500,000

Cash Discount on Notes Receivable Interest Revenue Notes Receivable

2,875,000 310,843

Cash Discount on Notes Receivable Interest Revenue Notes Receivable

2,750,000 216,927

Cash Discount on Notes Receivable Interest Revenue Notes Receivable

2,625,000 113,804

641,574 858,426 6,000,000

685,843 2,500,000

466,927 2,500,000

238,804 2,500,000

15

Chapter 3 – Receivables 3-9.

Pinky Pip Company The note is interest-bearing, but the rate of interest of the note (14%) is unreasonably higher than the prevailing rate (10%) for similar obligation. The present value of the note is determined as follows: 2.5 M + (14% x 7.5 M) = 3,550,000 2.5 M + (14% x 5.0 M) = 3,200,000 2.5 M + (14% x 2.5 M) = 2,850,000 Total or

2.5 M x 2.48685 (14% x 7.5 M) x (14% x 5.0 M) x (14% x 2.5 M) x Total

x x x

0.9091 0.8264 0.7513

P3,227,305 2,644,480 2,141,205 P8,012,990 P6,217,125 954,555 578,480 262,955 P8,013,115*

0.9091 0.8264 0.7513

*Difference in the computation is due to rounding off of present values a.

Amortization Table Date 01/01/13 12/31/13 12/31/14 12/31/15

Payment of Principal 2,500,000 2,500,000 2,500,000

Interest Paid 1,050,000 700,000 350,000

Interest Revenue 801,299 526,429 259,282*

Amortization of Premium 248,701 173,571 90,718*

Carrying Value 8,012,990 5,264,289 2,590,718 ------------

*Difference is due to rounding off b. 2013

Jan. 1

Dec. 31

2014

Dec. 31

2015

Dec. 31

Journal entries Notes Receivable Premium on Notes Receivable Gain on Sale of Land Land 8,012,990 – 7,500,000 = 512,990 Premium 8,247,955 – 6,000,000 = 2,247,955 Gain

7,500,000 512,990

Cash Premium on Notes Receivable Interest Revenue Notes Receivable

3,550,000

Cash Premium on Notes Receivable Interest Revenue Notes Receivable

3,200,000

Cash Premium on Notes Receivable Interest Revenue Notes Receivable

2,850,000

16

2,012,990 6,000,000

248,701 801,299 2,500,000

173,571 526,429 2,500,000

90,718 259,282 2,500,000

Chapter 3 – Receivables 3-10.

(Word Company) Uncollectible Accounts Expense Allowance for Uncollectible Accounts

P52,000 50,000

Required balance in allowance account: (2% x 500,000) + (10% x 200,000) + (20% x 100,000) Reported balance in allowance before adjustments (debit) Required adjustment charged to uncollectible accounts expense 3-11.

P50,000 2,000 P52,000

(Edit Company) Allowance for Uncollectible Accounts, beg Recovery of accounts previously written off Uncollectible accounts expense for 2013 Allowance for Uncollectible Accounts, end Accounts written off during 2013

3-12.

P 6,000 3,000 48,000 (12,000) P45,000

(Toyota Products, Inc.) a. b.

c. d.

e. f.

g.

h.

Accounts receivable Sales

4,800,000

Cash Sales discounts Accounts receivable

3,920,000 80,000

4,800,000

4,000,000

Allowance for uncollectible accounts Accounts receivable

20,000 20,000

Accounts receivable Allowance for uncollectible accounts

5,000

Cash Accounts receivable

5,000

Notes receivable Accounts receivable

25,000

Cash Notes payable-bank

400,000

Cash Accounts receivable

150,000

Notes payable-bank Cash

150,000

5,000 5,000 25,000 400,000 150,000 150,000

Uncollectible Accounts Expense Allowance for Uncollectible Accounts 9,000 – 20,000 + 5,000 = 6,000 debit 59,000 + 6,000 = 65,000 Interest receivable Interest revenue 25,000 x 12% x 30/360

65,000 65,000

250 250

Accounts receivable (450,000+4,800,000–4,000,000–20,000–25,000–150,000) Less Allowance for uncollectible accounts Amortized cost of accounts receivable

17

P1,055,000 59,000 P 996,000

Chapter 3 – Receivables 3-13.

(Rav, Inc.) Accounts Receivable, December 31, 2012 Sales on account during 2013 Cash received from customers Cash discounts allowed: (882,000 ÷ 98%) x 2% (495,000 ÷ 99%) x 1% Recovery of accounts written off Accounts written off as worthless Credit memoranda for sales returns Accounts Receivable, December 31, 2013

P 337,000 1,500,000 (1,600,000) P18,000 5,000

Allowance for Uncollectible Accounts, December 31, 2012 Recovery of accounts written off Accounts written off as worthless Impairment loss on receivables Allowance for Uncollectible Accounts, December 31, 2013

(23,000) 3,000 (11,000) (6,000) P 200,000 P 12,000 3,000 (11,000) 15,000 P 19,000

The computation may also be conveniently done through T-accounts, as follows: Balance, beg Sales on account Recovery Total Balance, end Write off Total 3-14.

Accounts Receivable 337,000 Collections 1,500,000 Cash discounts 3,000 Write off Sales returns 1,840,000 Total 200,000 Allowance for Uncollectible Accounts 11,000 Balance, beg Recovery Impairment 11,000 Total Balance, end

12,000 3,000 15,000 30,000 19,000

(Revo Company) Allowance for Uncollectible Accounts, January 1, 2013 Accounts written off Recovery of accounts previously written off Additional accounts written off Allowance for Uncollectible Accounts, December 31, 2012 before adjustments (debit balance) Required balance in Allowance account based on aging: (5% x 240,000) + (25% x 20,000) + (50% x 30,000) + (90% x 24,000) Required adjustment/Uncollectible Accounts Expense for 2013 Accounts Receivable, December 31, 2013 Less Allowance for Uncollectible Accounts Net amortized cost

3-15.

1,600,000 23,000 11,000 6,000 1,640,000

P 34,000 (47,000) 7,000 (6,000) (P12,000) 53,600 P65,600 P654,000 53,600 P600,400

(Adventure Company) a.

Required/Adjusted balance of Allowance for Uncollectible Accounts: 20% x 600,000 past due accounts P 120,000 5% x 1,400,000 current accounts 70,000 Total P 190,000

18

Chapter 3 – Receivables

3-16.

Accounts Receivable, December 31 Past due accounts Current accounts/Not yet past due

P 2,000,000 600,000 P 1,400,000

Accounts Receivable, January 1 Sales during 2012 Cash collected from customers Recovery of accounts previously written off Note received in settlement of an account Accounts written off as worthless Accounts Receivable, December 31

P 1,200,000 10,000,000 (8,720,000) 20,000 ( 400,000) ( 100,000) P 2,000,000

b.

Adjusted Allowance for Uncollectible Accounts, end Accounts written off during the year as worthless Recovery of accounts previously written off Allowance for Uncollectible Accounts, beg Uncollectible Accounts Expense for year 2013

P190,000 100,000 (20,000) (60,000) P210,000

c.

Accounts Receivable Less Allowance for Uncollectible Accounts Amortized cost of accounts receivable, December 31, 2013

P2,000,000 190,000 P1,810,000

(Maynilad Company) Alternative 1 Carrying value (10 M + 1.2 M) Present value of future cash inflows: Principal due on 12/31/15 (9M x 0.7972) Interest for 2 years 9M x 8% = 720,000; 720,000 x 1.6901 Impairment loss Entry: Restructured Notes Receivable Impairment Loss – Receivables Notes Receivable Interest Receivable Alternative 2 Carrying value (10 M + 1.2 M) Present value of future cash inflows: 2M + (8% x 10M) = 2,800,000 x 0.8929 2M + (8% x 8M) = 2,640,000 x 0.7972 2M + (8% x 6M) = 2,480,000 x 0.7118 2M + (8% x 4M) = 2,320,000 x 0.6355 2M + (8% x 2M) = 2,160,000 x 0.5674 Impairment loss Entry: Restructured Notes Receivable Impairment Loss – Receivables Notes Receivable Interest Receivable

11,200,000 P7,174,800 1,216,872 8,391,672 2,808,328 10,000,000 1,200,000 11,200,000 2,500,120 2,104,608 1,765,264 1,474,360 1,225,584

9,069,936 2,130,064

9,069,936 2,130,064

Alternative 3 Carrying value Present value of future cash inflows: Principal due on 12/31/15 10M x 0.7972 7,972,000 Interest due on 12/31/14 and 12/31/15 10M x 9% = 900,000; 900,000 x 1.6901 1,521,090 Impairment loss

19

8,391,672 P2,808,328

10,000,000 1,200,000 10,000,000

9,493,090 506,910

Chapter 3 – Receivables Entry: Restructured Notes Receivable Impairment Loss – Receivables Notes Receivable

9,493,090 506,910

Cash Interest Receivable

1,200,000

10,000,000 1,200,000

Alternative 4 Carrying value Present value of future cash inflows: Principal due on 12/31/13 11.2M x 0.797193876 Interest due on 12/31/13 and 12/31/14 11.2M x 12% = 1,344,000; 1,344,000 x 1.6900510 Impairment loss

11,200,000 8,928,572 2,271,428

11,200,000 -0-

No entry is required for the restructuring. 3-17. (Kate Company) (a) Cash Notes Payable – National Bank (b)

3-18.

750,000 750,000

Current assets: Trade and other receivables (including P900,000 of accounts pledged as collateral for a loan with National Bank)

P2,000,000

Current liabilities: Notes Payable – National Bank Interest Payable

P 750,000 7,500

(Lexus Company) Amount of the loan Less service charge (2% x 800,000) Net proceeds from the assignment of accounts receivable Sept. 1

Sept 1-30

P650,000 16,000 P634,000

Accounts Receivable Assigned Accounts Receivable

800,000

Cash Finance Charges Notes Payable – Pacific Bank

634,000 16,000

Cash

300,000

800,000

650,000

Accounts Receivable Assigned Sept. 30

Oct. 1-31

Notes Payable – Pacific Bank Interest Expense (650,000 x 12% x 1/12) Cash Allowance for Uncollectible Accounts Accounts Receivable Assigned Cash

300,000 300,000 6,500 306,500 10,000 10,000 400,000

Accounts Receivable Assigned Oct.

31

31

400,000

Notes Payable – Pacific Bank Interest Expense (350,000 x 12% x 1/12) Cash

350,000 3,500

Accounts Receivable Accounts Receivable Assigned

100,000

20

353,500 100,000

Chapter 3 – Receivables 3-19.

Accord Company) July 1 1

21 31

Aug. 1

15 31 Sept. 1

1 3–20.

4,000,000

Cash Finance Charges Notes Payable – Bank 5% x 3,200,000 = 160,000

3,040,000 160,000

Sales Returns and Allowances Accounts Receivable Assigned

150,000

Cash Sales Discounts Accounts Receivable Assigned 2% x 2,500,000 = 50,000

2,450,000 50,000

Notes Payable – Bank Interest Expense (3.2M x 0.12 x 1/12) Cash

2,500,000 32,000

Allowance for Uncollectible Accounts Accounts Receivable Assigned Cash Accounts Receivable Assigned

4,000,000

3,200,000

150,000

2,500,000

2,532,000 50,000 50,000 1,000,000 1,000,000

Notes Payable – Bank Interest Expense (700,000 x 0.12 x 1/12) Cash

700,000 7,000

Accounts Receivable Accounts Receivable Assigned

300,000

707,000 300,000

(Fortune Company) Oct. 1 1

31

Nov. 30

3-21.

Accounts Receivable Assigned Accounts Receivable

Accounts Receivable Assigned Accounts Receivable

2,000,000

Cash Finance Charges Notes Payable

1,410,000 90,000

2,000,000

1,500,000

Interest Expense (1.5M x 0.12 x 1/12) Notes Payable Accounts Receivable Assigned

15,000 985,000

Notes Payable Interest Expense (515,000 x 0.12 x 1/12) Cash Accounts Receivable Assigned

515,000 5,150 279,850

(Highlander Company) a. Sept. 1 Cash Receivable from Factor Loss from Factoring Accounts Receivable 800,000 x 10% =80,000 Loss; 720,000 x 5% = 36,000 withheld

21

1,000,000

800,000

684,000 36,000 80,000 800,000

Chapter 3 – Receivables Nov. 1

b. Dec. 31

3-22.

3-24.

582,000 18,000 600,000

Uncollectible Accounts Expense Allowance for Uncollectible Accounts (190,000 + 1,000,000) x 2% = 23,800 – 13,400

10,400 10,400

(Hiku Company) (a)

Selling price of Accounts Receivable 90% x P1,200,000= Factor’s holdback (6% x 1,080,000) Cash received from factoring

P1,080,000 (64,800) P1,015,200

(b)

Accounts receivable assigned balance (500,000 – 350,000) Balance of notes payable to the bank 400,000 – (350,000 – 4,000) Equity on assigned accounts

P 150,000 P

(54,000) 96,000

Face value of note discounted Interest for the full term April 30 – August 28 (50,000 x 9% x 120/360) Maturity value Discount (51,500 x 10% x 88/360) Proceeds

P

50,000

(c)

3-23.

Cash Finance Charges Notes Payable-Bank 3% x 600,000 = 18,000

P P

1,500 51,500 (1,259) 50,241

( Edsamail Company) (a)

Maturity value = 500,000 + (500,000 x .08) = 540,000 Proceeds = 540,000 – (540,000 x 0.10 x 5/12) = 517,500

(b)

Interest Receivable Interest Revenue 500,000 x 8% x 7/12

a.

23,333 23,333

Cash Loss on Sale of Notes Receivable Notes Receivable Interest Receivable

517,500 5,833

Proceeds 90,000 – (90,000 x 0.12 x 20/365)

= P89,408

500,000 23,333

Cash

89,408 Liability on Discounted Notes

b.

Maturity value 75,000 + (75,000 x 0.09 x 90/365) Proceeds 76,664 – (76,664 x 0.12 x 50/365) Cash

89,408 = P76,664 = P75,404 75,404

Liability on Discounted Notes c.

Maturity value 60,000 + (60,000 x 0.14 x 120/365) Proceeds 62,762 – (62,762 x 0.12 x 45/365) Cash

75,404 = P62,762 = P61,833 61,833

Liability on Discounted Notes

22

61,833

Chapter 3 – Receivables 3-25.

(Crosswind Corporation) 2013

Feb. 1 Apr. 1

Nov. 2

2 3-26.

Notes Receivable Accounts Receivable

60,000

Cash Liability on Discounted Notes 60,000 + (60,000 x .10 x 9/12) = 64,500 64,500 – (64,500 x .12 x 7/12) = 59,985

59,985

Liability on Discounted Notes Interest Expense (64,500 x 0.12 x 7/12) Notes Receivable Interest revenue (60,000 x 0.10 x 9/12)

59,985 4,515

Accounts Receivable (64,500 + 1,500) Cash

66,000

60,000 59,985

60,000 4,500 66,000

(Explorer Company) (a) Accounts receivable factored Purchase price Purchase price of accounts receivable factored Less amount withheld (5% x 1,700,000) Net cash received from the factored accounts (b) Cash Receivable from Factor Loss on Factoring Accounts Receivable

P2,000,000 85% P 1,700,000 85,000 P 1,615,000 1,615,000 85,000 300,000 2,000,000

Sales Returns Receivable from Factor

30,000

Cash

55,000

30,000

Receivable from Factor 3-27.

30,000

(Nature Company) (a) 1/1/12 (1) (2)

(3) (4)

Interest Revenue Interest Receivable

2,800 2,800

Accounts Receivable Sales

2,800,000

Cash Sales Discounts Accounts Receivable (2,218,000 – 180,000)* Accounts Receivable Assigned *

2,200,000 18,000

2,800,000

2,038,000 180,000

Notes Receivable Accounts Receivable

250,000

Cash Notes Receivable Interest Revenue

216,000

250,000 200,000 16,000

23

Chapter 3 – Receivables (5)

(6)

(7)

(8) (9)

(10)

Cash Liability on Discounted Notes

41,400

Liability on Discounted Notes Interest expense Notes Receivable Interest revenue

41,400 4,600

Accounts Receivable Assigned Accounts Receivable

300,000

Cash Finance Charges Notes Payable

222,000 18,000

41,400

40,000 6,000 300,000

240,000

Accounts Receivable Notes Receivable Interest Revenue

15,900

Allowance for Uncollectible Accounts Accounts Receivable

12,000

15,000 900 12,000

Notes Payable Interest Expense Cash

180,000 3,000 183,000

Uncollectible Accounts Expense Allowance for Uncollectible Accounts 20,000 – (12,000 – 12,000 )

20,000 20,000

(11)

Interest Receivable Interest Revenue *See item (9) (b)

3,200 3,200

Trade and Other Receivables

P1,014,100

Trade and Other Receivables include the following: Notes Receivable Accounts Receivable – Unassigned Accounts Receivable - Assigned Interest Receivable Allowance for Uncollectible Accounts Total

24

P

95,000 815,900 120,000 3,200 (20,000) P1,014,100

Chapter 3 – Receivables MULTIPLE CHOICE QUESTIONS Theory MC1 MC2 MC3 MC4 MC5 MC6 MC7 MC8 MC9 MC10

A B A A C A D A A C

MC11 MC12 MC13 MC14 MC15 MC16 MC17 MC18

C C A C A D A C

Problems MC19 MC20

B D

MC21 MC22 MC23 MC24 MC25 MC26 MC27 MC28 MC29

C B A D D C D B B

MC30 MC31 MC32 MC33 MC34 MC35 MC36 MC37

A A B D C C C B

MC38 MC39 MC40 MC41 MC42 MC43 MC44 MC45

A C B B D C A D

* Date July 1, July 1, July 1, July 1, July 1,

450,000 x 1.4 = 630,000; 630,000 – 585,000 = 45,000 105,000 x .90 = 94,500 (Invoice price/Gross) 94,500 x .98 = 92,610 (net price) 200,000 x .90 x .95 = 171,000 (Invoice price/Gross); 171,000 x .97 = 165,870 (Net) 1,300,000 + 5,400,000 + 25,000 – 4,750,000 – 125,000 = 1,850,000 360,000 ÷ 80% = 450,000; 450,000 + 80,000 – 430,000 = 100,000 75,000 + 45,000 = 120,000 3% x 1,000,000 = 30,000 30,000 + 8,000 = 38,000 270,000 – 250,000 = 20,000; 20,000 + 23,000 – 28,000 – 5,000 = 10,000 17,500 – 30,500 + 8,050 + 200,000 = 15,050 480,000 + 2,400,000 – 2,560,000 – 17,600 – 36,800* + 4,800 = 270,400 *1,411,200 ÷ .98 = 1,440,000 x 2% = 28,800 792,000 ÷ .99 = 800,000 x 1% = 8,000; 28,800 + 8,000 = 36,800 19,200 + 4,800 – 17,600 = 6,400; 5% x 270,400 = 13,520; 13,520 – 6,400 = 7,120 (5% x 600,000) + (10% x 40,000) + 14,000 = 48,000 20,000 + 7,500 – 12,500 – 3,700 = 11,300 50,000 + (50,000 x 10%) = 55,000; 55,000 – (55,000 x .12 x 6/12) = 51,700 400,000 x .75 = 300,000; 300,000 x 10% = 30,000 300,000 + 30,000 = 330,000 1,940,000 x 13.4% x 1/12= 21,663 2,000,000 x 12% x 1/12 = 20,000 (Note: The difference between interest income of P21,663 and interest receivable of 20,000 is debited to Discount on Notes Receivable). 902,500 – (11% x 2,800,000) = 594,500 (308,000 x 6/12) + (242,605 x 6/12) = 275,303 (See complete amortization table below)* 500,000 + (500,000 x 8%) = 540,000; 540,000 – (540,000 x 10% x 8/12) = 504,000 1,250,000 - (2% x 1,250,000)} = 1,225,000; 1,225,000 + 695,000 = 1,920,000 (500,000 + 2,200,000) x 3% = 81,000; 81,000 – 32,000 = 49,000 550,000 – [(500,000 x 0.8265) + (40,000 x 1.7355)] = 67,380 5,500,000 – [(4,000,000 X .83) + (320,000 X 1.74)] = 1,623,200 (4,000,000 X .83) + (320,000 X 1.74) = 3,876,800 Annual payment

2012 2013 2014 2015 2016

902,500 902,500 902,500 902,500

Interest income

11% x 2,800,000=308,000 11% x 2,205,500=242,605 11% x 1,545,605=170,017 902,500-813,122=89,378

25

Reduction in principal 902,500-308,000=594,500 902,500-242,605=659,895 902,500-170,017=732,483 813,122

Balance 2,800,000 2,205,500 1,545,605 813,122 -0-