PROBLEM 1. Bhebhe Co. showed the following balances on Dec.

31, 2017:
Accounts Receivable P500,000
Allowance for doubtful accounts 25,000
The following summary of transactions occurred during 2018:
1. Sales on account, P400,000, FOB destination, freight prepaid, P20,000. Bhebhe has the policy of selling
merchandise on a 3/10, 2/20, n/60 basis.
2. Sales on account, P600,000, FOB shipping point, freight prepaid, P30,000.
3. Sales on account, P200,000, FOB shipping point, freight collect, P10,000.
4. Sales on account, P800,000, FOB destination, freight collect, P40,000.
5. Sold merchandise and received the following promissory notes:
Date of Note Face Value (P) Maturity date . Interest per annum
Apr. 1, 2018 300,000 March 31, 2019 12%
Sept. 1, 2018 600,000 P200,000 every Sept. 1 for 3 years Non-interest bearing
Oct. 1, 2018 500,000 Sept. 30, 2020 Non-interest bearing
Note: Effective interest rate for non-interest bearing note is 12%. Use continuous factors and round off
total PV of cash flows to the nearest peso.
6. Collections within the 10-day discount period. Assume the amount given is the gross receivable that
should be credited. Any applicable freight charges is allocated on a pro-rata basis:
From sales in No. 2 P315,000
From sales in No. 4 200,000
7. Collections within the 11 to 20 day discount period:
From sales in No. 1 P300,000
From sales in No. 3 P150,000
8. Collections beyond the discount period, P660,000. Included in this collection is the amount of P300,000
from No. 4.
9. Accounts written off, P50,000.
10. Recoveries of P10,000. This amount is not included in no. 8.
Required:
A. Journal entries to record transactions from 1 to 10.
B. Adjusting entries to take up:
1. Doubtful accounts expense for 2018. The company uses the percentage of accounts receivable in
estimating doubtful accounts.
2. P100,000 of sales in no. 4 estimated to be paid in 2019 within the 10-day discount period.
3. Interest income from each of the promissory notes received.
C. Compute the net realizable value of accounts receivable.

PROBLEM B. On December 31, 2018, the ledger accounts of Nakakalo Co. included the following accounts:
DEBIT CREDIT
Notes Receivable 1,384,000
Unearned Interest Income 50,667
Accrued Interest Receivable 30,000
Accounts Receivable 3,000,000
Allowance for Doubtful Accounts 60,000

Additional Information:
1. The notes receivable consisted of the following:
A. A P900,000, 10% note received by Nakakalo on September1, 2018. Principal plus interest are payable
on September 1, 2019, 2020 and 2021.
B. A P484,000, non-interest bearing note received by Nakakalo on March 1,2018. Effective interest rate is
10% and the note is due on March 1, 2020.

2. The company uses the percentage of Accounts Receivable in estimating doubtful accounts.

Accounts receivable transactions for 2019:

A. Sales for 2019: (Note: Prepare one compound entry)
Cash Sales P 2,000,000
Credit Sales (all on terms of 2/10, n/30 5,000,000
 B. Cash collected from account customers: (Note: Prepare one compound entry)
Within the discount P 2,450,000
Beyond the discount 1,600,000

C. Accounts written off during the year, P100,000.

D. Collection of Accounts previously written off, P30,000. This collection is already included in “B”.

E. Promissory noted received from sale of merchandise:

DATE OF NOTE MATURITY DATE INTEREST EFFECTIVE FACE
RATE RATE
AMOUNT
May 1, 2019 P500,000 principal plus interest every May 1 10% P2,000,000
June 15, 2019 September 13, 2019 10% 400,000
October 1,2019 October 1, 2020 10% 165,000
(Note: Prepare one entry for interest-bearing notes and another entry for non-interest bearing note)

F. Promissory notes discounted during the year:

FACE AMOUNT DATE OF DISCOUNTING DISCOUNT RATE
P 484,000 September 1, 2019 15%
400,000 August 14, 2019 15%
(Note: Aside from entries to record discounting, include an entry to update amortization on the P484,000 note.)

G. Accounts receivable assigned on a non-notification basis, November 1, 2019, P1,000,000: The loan
contract stipulated a cash advance of 80% less a 5% service charge based on the cash advance, 2%
monthly interest is to be charged at the end of each month based on outstanding loan balance.
Nakakalo made collections on the assigned accounts for P300,000 in November 2019 and P200,000 in
December 2019. The collections were remitted to the bank. (Note: Prepare separate entries for the
month of November and December.)

H. The following invoices were factored on November 15, 2019:

CUSTOMER DATE OF INVOICE AMOUNT
A Co. November 4, 2019 P 50,000
B Co. November 10, 2019 200,000
C Co. November 12, 2019 150,000
(Note: These are already included in “A” above)
The factor advanced 80% of the accounts factored and charged 5% service charge based on the cash
advance. The factor also withheld 20% of the factored accounts. By the end of 2019, all of the factored
accounts were collected with the exception of a credit memo for P50,000 issued to C Co. for return of
merchandise.
REQUIRED:
A. Journal entries to record the transactions for 2019.
B. Adjusting entries on December 31, 2019.
C. Prepare a partial statement of financial position on December 31, 2019. Use the format below:
Current Assets:
Trade and Other Receivables:
Notes Receivable (net of Notes Receivable Discounted of Pxxx) P xxx
Less: Unearned Interest Income xxx P xxx
Accrued Interest Receivable Xxx
Accounts receivable – unassigned P xxx
Accounts receivable – assigned xxx
Total P xxx
Less: Allowance for Doubtful Accounts xxx xxx

Non-current Assets:
Other non-current assets:
Notes Receivable P xxx
Less: Unearned Interest Income xxx P xxx