1.Purple Company showed the following balances on December 31, 2020:

Accounts receivable-unassignedP1,000,000

Accounts receivable-assigned300,000

Allowance for doubtful accounts-January 130,000

Receivable from factor40,000

Note payable-bank240,000

During the year 2020 Purple Company found itself in financial distress and decided to resort to receivable financing.

On June 30, Purple Company factored P200,000 of its accounts receivable to a finance company.The finance company charged a factoring fee of 5% of the accounts factored and withheld 20% of the amount factored.

On December 31, Purple Company assigned P300,000 of its accounts receivable to a bank under a nonnotification basis.The bank advanced 80% less a service fee of 5% of the account assigned.Purple Company signed a promissory note for the loan.

On December 31, it is estimated that 5% of the outstanding accounts receivable may prove uncollectible.

REQUIRED:

a.Entry to record the factoring.

b.Entry to record the assignment.

c.Entry to adjust the allowance for doubtful accounts on December 31.

2.On December 1, 2020, Solvent Company assigned specific accounts receivable totaling P5,000,000 as collateral on a P4,000,000 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 a 5% finance fee deducted in advance on the assigned accounts.

The December collections of assigned accounts receivable amounted to P2,000,000 less cash discount of P200,000.

On December 31, 2020, the entity remitted the collections to the bank in payment for the interest accrued on December 31, 2020 and the note payable.

The entity accepted sales returns of P100,000 on the assigned accounts and wrote off assigned accounts of P300,000.

A.What amount of cash was received from the assignment of accounts receivable on December 1, 2020?

B.What is the carrying amount of note payable on December 31, 2020?

C.What amount should be disclosed as the equity of Solvent Company in assigned accounts on December 31, 2020?(hint : Equity in assigned accounts is equal to balance of AR-assigned less Carrying amount of Notes Payable)

3.On December 1, 2020 Pozurrubio Company assigned on a nonnotification basis accounts receivable of P5,000,000 to a bank in consideration for a loan of 90% of the receivables less a 5% service fee on the accounts assigned.Pozurrubio signed a note for the bank loan.On December 31, 2020, Pozurrubio collected assigned accounts of P3,000,000 less discount of P200,000.Pozurrubio remitted the collections to the bank in partial payment for the loan.The bank applied first the collection to the interest and the balance to the principal.The agreed interest is 1% per month on the loan balance.In its December 31, 2020 balance sheet, Pozurrubio should report note payable as a current liability at__________________ ?

4.Binalonan Company factored P5,000,000 of accounts receivable to ABC Company on July 1, 2020.Control was surrendered by Binalonan.ABC assessed a fee of 5% and retains a holdback equal to 20% of the accounts receivable.In addition ABC charged 12% computed on a weighted average time to maturity of the receivables of 30 days.

1.Binalonan Company will receive and record cash of_______________?

2.Assuming all receivables are collected, Binalonan Company's cost of factoring the receivables would be__________________?