Problem 5

Yolo Corporation experienced financial difficulty in 2020. It decided to go into note receivable discounting to be able to ease some of its financing problems. During 2020, the following transactions relating to it transpired:

May 1 Discounted at the bank a 4-month, 10% interest bearing note receivable from a customer dated February 1, 2020, P400,000. Discount rate was 12%.

June 1 Bank informed Yolo that the 4-month note was honored and paid by its issuer.

June 30 Discounted at the bank an 8-month, non-interest bearing note receivable from a customer dated January 1, 2020, P200,000. Discount rate was 15%

August 1 Discounted at the bank a 180-day, 12% interest bearing note receivable dated

June 15, 2020, P300,000. Discount rate was 15%.

September 5 The bank informed Yolo that the 8-month note was in default. The full maturity value and protest fee of P5,000 was paid by Yolo the next day.

December 1 The customer paid the maturity value of the 8-month note, protest fee, and 10% interest on the full amount paid by Yolo to the bank from date of default,

Prepare the journal entries under the following separate assumptions: a. Discounting was considered as without recourse b. Discounting was considered as conditional sale c. Discounting was considered as secured borrowing