Problem 9-1

Journal Entries

Jan. 1 Notes receivable P500, 000

Sales P500, 000

Mar. 1 Cash 503,500

Loss on note discounting 6,500
Notes receivable 500,000
Interest income 10,000

Computation
Principal 500,000
Add: Interest (500,000 x 12% x 6/12) 30,000
Maturity Value 530,000
Less: Discount (530,000 x 15% x 4/12) (26,500)
Net proceeds 503,500

Principal 500,000
Add: Accrued interest receivable (500,000 x 12% x 2/12) 10,000
Carrying amount of NR 510,000

Net proceeds 503,500

Less: Carrying amount of NR (510,000)
Loss on note discounting 6,500

July 1 No entry

Problem 9-2
Journal Entries
Mar. 14 Accounts receivable P2, 050,000
Sales P2, 050,000

Apr. 7 Notes receivable 2,000,000

Freight out 50,000
Accounts receivable 2,050,000

Apr. 20 Cash 2,001,750

Loss on note discounting 8,250
Notes receivable discounted 2,000,000
Interest income 10,000

Computation
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
Add: Accrued interest receivable (2,000,000 x 12% x 15/360) 10,000
Carrying amount of NR 2,010,000

Net proceeds 2,001,750

Less: Carrying amount of NR (2,010,000)
Loss on note discounting 8,250

June 4 Accounts receivable (2,040,000 + 10,000) 2,050,000

Cash 2,050,000

Notes receivable discounted 2,000,000

Notes receivable 2,000,000

July 4 Cash 2,070,000

Accounts receivable 2,050,000
Interest income (2,000,000 x 12% x 30/360) 20,000

Problem 9-3

Requirement a – JOURNAL ENTRIES

April 5 Notes receivable P500, 000

Accounts receivable P500, 000

19 Cash 501,075
Loss on note discounting 1,425
Notes receivable discounted 500,000
Interest income 2,500

Computation
Principal 500,000
Add: Interest (500,000 x 12% x 60/360) 10,000
Maturity Value 510,000
Less: Discount (510,000 x 14% x 45/360) (8,925)
Net proceeds 501,075

Principal 500,000
Add: Accrued interest receivable (500,000 x 12% x 15/360) 2,500
Carrying amount of NR 502,500

Net proceeds 501,750

Less: Carrying amount of NR (502,500)
Loss on note discounting 1,425

May 3 Notes receivable 1,000,000

Accounts receivable 1,000,000
 16 Cash 995,000
Loss on note discounting 5,000
Notes receivable discounted 1,000,000

Principal 1,000,000
Less: Discount (1,000,000 x 12% x 15/360) (5,000)
Net proceeds 995,000

25 Notes receivable 1,500,000

Interest income 4,500
Accounts receivable 1,504,500

Principal 1,500,000
Add: Interest (1,500,000 x 12% x 60/360) 30,000
Maturity Value 1,530,000
Less: Discount (1,530,000 x 12% x 50/360) (25,500)
Net credit 1,504,500

June 7 Accounts receivable (510,000 + 20,000) 530,000

Cash 530,000

Notes receivable discounted 500,000

Notes receivable 500,000

15 Notes receivable 800,000

Sales 800,000

18 Cash 532,650
Accounts receivable 530,000
Interest income (530,000 x 12% x 15/360) 2,650

Requirement b – ADJUSTMENTS on June 30

1. Accrued interest receivable 4,000

Interest income (800,000 x 12% x 15/360) 4,000
To record accrued interest on D’s note

2. Notes receivable discounted 1,000,000

Notes receivable 1,000,000
To cancel the contingent liability on B’s note.
This note matured on May 31. Since there is no notice of dishonor it is therefore presumed that
the said note is paid on the date of maturity.