University - Year 2

Accounting

EXERCISE 1

Pittance Company provided the following information in connection with a bank loan.

MAR 1 Pittance Company borrowed P2,000,000 from bank on a six-month note

carrying an interest of 12% per annum. Accounts of P3,000,000 are
pledged to secure the loan.
Mar-01 Cash 2,000,000
N/P 2,000,000
APR 1 Pledged accounts of P1,000,000 are collected minus 2% discount.
Apr-01 Cash 980,000
Sales Discount 20,000
Accounts Receivable 1,000,000
JUN 1 The remaining pledged accounts are collected.
Jun-01 Cash 2,000,000
Accounts Receivable 2,000,000
SEP 1 The bank loan is repaid plus interest.
Sep-01 Note payable - bank 2,000,000
Interest expense (12% x 2,000,000 x 6/12) 120,000
Cash 2,120,000
Required: Prepare journal entries to record the transactions.