Notes Payable Problem 19-1 (AICPA Adopted)

NOTES PAYABLE
Problem 19-1(AICPA Adopted)
Roth Company received from a customer a one-year, P500, 000 note bearing annual interest of
8%. After holding the notes for six months, the entity discounted the note without recourse at
10%. What amount of cash was received from the bank?
A. 540, 000
B.523, 810
C. 513, 000
D.495, 238
PROMBLEM 19-2(AICPA Adopted)
On July 1, 2014, Lee Company sold goods in exchange for P2, 000, 000, 8-month, noninterest-
bearing note receivable at the time of the sale, the market sale of interest was 12%. The entity
discounted the note at 10% on September 1, 2014?
1. What is the cash received from discounting?
A. 1,940, 000
B. 1, 938, 000
C. 1, 900, 000
D. 1, 880, 000
2. What is the loss on note receivable discounting?
A. 100, 000
B.75, 000
C.25, 000
D. 0
PROBLEM 19-3(AICPA Adopted)

Apex Company accepted from a customer a P1, 000, 000 face amounts, 6-month, 8%note dated
April 15, 2014. On the same date, the entity discounted the note without recourse at a 10%
discount rate.
1. What amount of cash received from the discounting?
A.1, 040, 000
B. 990, 000
C.988, 000
D.972, 000
2. What is the loss on receivable discounting?
A. 50, 000
B.40, 000
C. 52, 000
D. 12, 000
On June 30, 2014, Ray Company discounted at the bank a customer P6, 000, 000, 6-month, 10%
note receivable dated April 30, 2014. The bank discounted the note at12% without recourse.
1. What is the amount received from the note receivable discounting?
A.5, 640, 000
B.5, 760,000
C. 6, 048, 000
D. 6, 174, 000
A.252, 000
B.152, 000
C. 52, 000
D.48, 000
On July 1, 2014, Kay Company sold to Mando Company for P1, 000, 000. Kay accepted a 10%
note receivable for the entire sales price.
This note is payable in two equal instalments of P500, 000 plus accrued interest on December 31,
2014 and December 31, 2015.
On July 1, 2015, the entity discounted the note at a bank at an interest rate of 12%. What is the
amount received from the discounting of note receivable?
A. 484,000
B. 493, 500
C.503, 500
D. 517, 000
Rand Company accepted from a customer a P4, 000, 000, 90-day, 12% interest-bearing note
dated August 31, 2014. On September 30, 2014 the entity discounted the note with recourse t
Apex State Bank at 15%.
However, the proceeds were not received until October 1, 2014. The discounting with recourse is
accounted for as a conditional sale with recognition of a contingent company.
1. What is the amount received from the discounting of note receivable?
A.4, 017, 000
B.4, 120, 000
C.4, 103, 000
D.3, 965, 500
A.40, 000
B.23, 000
C.17, 000
D.20, 000
PROBLEM 19-7(IAA)
On august 31, 2014, Sunflower Company discounted with recourse a note at the bank at
discounted rate of 15%. The note was received from the customer on August 1, 2014, is for 90
days, has a face value of P5, 000, 000, and a carries an interest of 12%. The customer paid the
note to the bank on October 31, 2013, the date of maturity.
If the discounting is accounted for secured borrowing, what is the interest expense to be
recognized on August 31, 2014?
A. 50, 000
B. 21, 250
C.28, 750
D.25, 000
PROBLEM 19-8(IAA)
On January 1, 2014, Cactus Company sold land with carrying amount of P1, 500, 000 in
exchange for a 9-month, 10% note with face value of P2, 000,000. The 10% rate properly
reflects the time value of money for this type of note.
On April 1, 2014, the entity discounted the note with recourse. The bank discount is 12%. The
discounting transaction is accounted for as a secured borrowing.
On October 1, 2014, the maker dishonoured the note receivable. The entity paid the bank the
maturity value of the note plus protest fee of P10, 000.
On December 31, 2014, the entity collected the dishonored note in full plus 12% annual interest
on the total amount due.
1. What is the amount received from the discounting of note receivable?
A. 2, 150, 000
B. 2, 021, 000
C. 2, 050, 000
D. 1,921, 000
2. What is the interest expense to be recognized on April 1, 2014?
A. 50, 000
B. 29, 000
C. 21, 000
D. 25, 000
3. What is the amount collected from the customer on December 31, 2014?
A. 2, 150, 000
B. 2, 224, 800
C. 2, 160, 000
D. 2, 214, 500
On august 1, 2014, Vann Company’s P5, 000, 000 one-year, non-interest-bearing note due July
31, 2015 was discounted at Homestead Bank at 10.8%. The entity used the straight line method
of amortizing discount. What is the carrying amount of the note payable on December 31, 2014?
A. 5, 000, 000
B. 4, 775,000
C. 4,685, 000
D. 4, 460, 000
On November 1, 2014, Davis Company discounted with recourse at 10% a one-year, noninterest-
bearing, P2, 050, 000 note receivable maturing on January 31, 2015. The discounting of the note
receivable is accounted for as a conditional sale with recognition of a contingent liability. What
amount of contingent liability for this note must be disclosed in the financial statements for the
year ended December 31, 2014?
A. 2, 050, 000
B. 2, 000, 000
C. 2, 033, 333
D. 0

Brooke Company discounted its own P5, 000, 000 one-year note at discount rate of 12%, when
the prime rate was 10%. In reporting the note prior to maturity, what rate should be used for the
recording of the interest expense?
A. 10.0%
B. 10.7%
C. 12.0%
D. 13.6%

Notes Payable Problem 19-1 (AICPA Adopted)

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Notes Payable Problem 19-1 (AICPA Adopted)

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NOTES PAYABLE

Problem 19-1(AICPA Adopted)

PROMBLEM 19-2(AICPA Adopted)

1. What is the cash received from discounting?

2. What is the loss on note receivable discounting?

PROBLEM 19-3(AICPA Adopted)

1. What amount of cash received from the discounting?

A.1, 040, 000

2. What is the loss on receivable discounting?

PROBLEM 19-4(AICPA Adopted)

1. What is the amount received from the note receivable discounting?

A.5, 640, 000

2. What is the loss on note receivable discounting?

PROBLEM 19-6(AICPA Adopted)

1. What is the amount received from the discounting of note receivable?

A.4, 017, 000

B.4, 120, 000

C.4, 103, 000

D.3, 965, 500

2. What is the loss on note receivable discounting?

1. What is the amount received from the discounting of note receivable?

2. What is the interest expense to be recognized on April 1, 2014?

PROBLEM 19-9(AICPA Adopted)

PROBLEM 19-10(AICPA Adopted)

PROBLEM 19-11(AICPA Adopted)

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