During the year 2021, the management of Lakers Company is looking into possible alternatives of obtaining additional financing. After considering several options, Lakers decided to use its receivables as a means of obtaining cash to continue operations.


On July 16, 2021, Lakers factored P1,200,000 of its accounts receivable to High Finance Company. Factoring fee was 15% of the receivables purchased and the finance company withheld 10% of the purchase price as protection against sales returns and allowances.

On November 30, 2021, accounts receivable amounting to P600,000 were assigned to Manila bank as collateral. The bank advanced 75% of the assigned accounts less finance charge of 5% based on the amount advanced. During December, Lakers collected P200,000 which was remitted to the bank on December 31. This amount was applied first to payment of interest at the rate of 1% per month based on the outstanding balance and the remainder of the collection was applied to the principal.

A customer's 10%, 120-day note for P300,000 dated September 20, 2021 was discounted with Banco Filipinas on November 4, 2021. The bank uses a discount rate of 12% and a 360-day year.

Additional information is as follows:

Allowance for Uncollectible Accounts, December 31, 2021 (before adjustment) - P32,000

Accounts Receivable (not including factored and assigned accounts), December 31, 2021 - 500,000

Estimated uncollectible, December 31, 2021 (based on accounts receivable balance) - 5%

(a) How much is the equity of Lakers Company in assigned accounts at December 31, 2021, after its remittance to the bank

(b) How much was the net proceeds from the discounting of notes?

PROBLEM 2
On January 1, 2021, Rockets Corporation sold equipment costing 380,000 with accumulated depreciation of 160,000 on the date of sale. Rockets received as consideration for the sale, a 400,000 non-interest-bearing note, due January 1, 2024. There was no established exchange price for the equipment and the note had no ready market. The prevailing rate of interest for a note of this type at January 1, 2021 was 10%. The present value of 1 at 10% for three periods is 0.75.


(a)What is the note's carrying amount at December 31, 2021?