University - Year 2

Accounting

EXERCISE 2

Idealist Company secured a one-year bank loan of P4,000,000 on October 1, 2020. The
loan was discounted at 10%.
2019
Oct-01 Cash 3,600,000
Discount on N/P (10% x 4,000,000) 400,000
Notes payable - bank 4,000,000
Interest Expense (400,000 x 3/12) 100,000
Discount on N/P 100,000
The entity signed a note for the loan and pledged P5,000,000 of its accounts receivable
as collateral for the same. The accounting period of the entity ends on December 31.
2020
Oct-01 Note payable - bank 4,000,000
Cash 4,000,000
Dec-31 Interest Expense 300,000
Discount on N/P 300,000

Current Liabilities:
Note payable - bank (Nov. 3) 4,000,000
Discount on N/P -300,000
Carrying amount 3,700,000

Note 3 - Note payable - bank

Accounts of P5,000,000 are pledged to secure bank loan of
P4,000,000
Required: Prepare journal entries, including adjustment from the date of loan up to
date of maturity.