Problem 21-3 (IAA)

On December 1, 2016, Bamboo Company assigned specific accounts receivable totaling

P4,000,000 as collateral on a P3,000,000, 12% note from a certain bank. The entity will continue
to collect the assigned accounts receivable. In addition to the interest on the note, the bank also
charged 5% finance fee deducted in advance on the P3,000,000 value of the note. The December
collections of assigned accounts receivable amounted to P2,000,000 less cash discount of
P100,000. On December 31, 2020, the entity remitted the collections to the bank in payment for
the interest accrued on December 31, 2016 and the note payable. The entity accepted sales
returns of P150,000 on the assigned accounts and wrote off assigned accounts of P200,000.

1. What is the balance of accounts receivable—assigned on December 31, 2016?

a. 2,100,000

b. 2,000,000

c. 1,650,000

d. 1, 850,000

COMPUTATIONS:

12/01/16/ Receivable P4,000,000

Less: Cash less cash discount allowed (1,900,000)
Sales discount (100,000)
Sales return (150,000)
Assigned accounts written off during the month (200,000)
Assigned accounts receivable Php 1,650,000

2. What amount should be disclosed as the equity of Bamboo Company in assigned

accounts on December 31, 2016?

a. 550,000

b. 870,000

c. 520,000

d. 970,000
COMPUTATION:

Accounts Receivable--assigned (4,000,000-2,000,000) 2,000,000

Notes Payable (1,130,000)

P 870,000