BALIWAG, DANNICA C.

2BSA1
ACTIVITY 3 – RECEIVABLE FINANCING
I. PLEDGE

Debit Credit
Apr. 24 Cash 750,000
Loans Payable 723,000
Interest Expense 27,000
To record loans payable

II. ASSIGNMENT
a) Notification Basis

Debit Credit
Accounts Receivable - assigned 900,000
Accounts Receivable 900,000

Cash 750,000
Discount on Loan Payable 27,000
Loans Payable 723,000

b) Non-notification Basis

Debit Credit
Cash 350,000
Allowance for Doubtful Accounts 530
Sales Discount 560
Accounts Receivable – Assigned 351,090

Loans Payable 350,000

Interest Expense 7,500
Cash 357,500

c) Accounts Receivable – assigned (900,000 – 351,090) 548,910

Loans Payable (750,000 – 350,000) (400,000)
Equity in Assigned Receivables 148,910

III. FACTORING

Debit Credit
a) Cash 368,000
Due from Factor (2% x 400,000) 8,000
Loss on Sale of Receivables (6% X 400,000) 24,000
Accounts Receivable 400,000

b) Accounts Receivable 400,000

Due to DEF Financing Corp. 8,000
Financing Revenue 24,000
 Loans Payable 368,000

Cash 368,000
Due from Factor 8,000
Loss on sale of Receivables 31,000
Accounts Receivable 400,000
Recourse Liability 7,000

IV. DISCOUNTING OF NOTES

Principal 1,000,000
Add: Interest (1,000,000 X 12% X 6/12) 60,000
Maturity Value 1,060,000
Less: Discount (1,060,000 X 16% X 3/12) (28,267)
Net Proceeds 1,031,733

Principal 1,000,000
Add: Interest (1,000,000 X 12% X 4/12) 40,000
Carrying amount of Notes Receivable (1,040,000)
Interest Expense (8,267)

a) Without Recourse Basis

Debit Credit
Nov. 01 Cash 1,031,733
Loss on NR Discounting 8,267
Notes Receivable 1,000,000
Interest Income 40,000
To record loans payable

b) With Recourse Basis – Conditional Sale

Debit Credit
Nov. 01 Cash 1,031,733
Loss on NR Discounting 8,267
Notes Receivable Discounted 1,000,000
Interest Income 40,000
To record loans payable

c) With Recourse Basis – Secured Borrowing

Debit Credit
Nov. 01 Cash 1,031,733
Interest Expense 8,267
Liability for NR Discounted 1,000,000
Interest Income 40,000
To record loans payable