Accounts Receivable
1,500,000.00 4,500,000.00
7,935,000.00 2,500,000.00
15,000.00
15,000.00
1,100,000.00
55,000.00
30,000.00
1,250,000.00 AR end
9,450,000.00 9,450,000.00
Accounts Receivable
Sales
Accounts Receivable
Allowance for Doubtful Accounts
Cash
Sales Discount
Accounts Receivable
Customer paying w/in 10 days
Customer paying w/in 15 days
Recovery
Customer paying beyond
Cash Received
Req'd Allow
Customer paying w/in 10 days
Customer paying w/in 15 days
Allowance for Doubtful Accounts
Recovery
55,000.00
60,000.00
Customer paying
beyond
15,000.00
Cash Received
50,000.00
105,000.00
Cash
Sales Discount
15,000.00
15,000.00
Cash
Sales Discount
Accounts Receivable
2,475,000.00
25,000.00
2,500,000.00
15,000.00
Cash
15,000.00
15,000.00
15,000.00
Cash
1,100,000.00
Accounts Receivable
1,100,000.00
Allowance for Doubtful Accounts
Cash
Sales Discount
Accounts Receivable
4,410,000.00
90,000.00
2,475,000.00
25,000.00
Sales Return
15,000.00
Accounts Receivable
1,100,000.00
8,000,000.00
115,000.00
Doubtful Accounts Expense
Allowance for Doubtful Accounts
4,500,000.00
115,000.00
2,475,000.00
25,000.00
Accounts Receivable
Allowance for Doubtful Accounts
8,115,000.00
90,000.00
25,000.00
4,500,000.00
Accounts Receivable
8,000,000.00
115,000.00
4,410,000.00
90,000.00
4,410,000.00
2,475,000.00
15,000.00
1,100,000.00
8,000,000.00
90,000.00
Cash
Sales Discount
Accounts Receivable
7,935,000.00
Cash
Sales Discount
Accounts Receivable
30,000.00 Doubtful Accounts Expense
105,000.00
4,410,000.00
Doubtful Accounts Rate = Allow.
ForReceivable
DA Beg / Accounts Receivable Beg
Accounts
Doubtful Accounts Rate = 60,000/1,500,000
4.00%
7,935,000.00
Accounts Rec'l
4,500,000.00
2,500,000.00
15,000.00
1,100,000.00
8,115,000.00
4,500,000.00
2,500,000.00
15,000.00
1,100,000.00
8,115,000.00
55,000.00
55,000.00
30,000.00
30,000.00
30,000.00
30,000.00
Accounts Receivable Ending
Less Allowance for Doubtful Accounts
Net Realizable Value
1,250,000.00
50,000.00
1,200,000.00
2,500,000.00
Accounts Receivable
Aging Schedule
Receivable15,000.00
Balance DA Rate Allowance for Doubtful Accounts
NotDoubtful
yet due Accounts
1,700,000.00
0%
Allowance for
15,000.00
Cash
Cash
1-30 days past due
31-60 days past due
61-90 days past due
Accounts Receivable
Over 90 days past due
Total
1,200,000.00
100,000.00
15,000.00
150,000.00
120,000.00
3,270,000.00
1,100,000.00
Accounts Receivable
Allowance for Doubtful Accounts
Written-off
235,000.00
Add'l writted-off
30,000.00
Allowance
for Doubtful Accounts
Allowance
End Bal
Accounts
Receivable 280,000.00
545,000.00
Sales Return
Allowance Beg Balance
Accounts Receivable
Add
Recoveries
Provision for Doubtful Accounts
Doubtful Accounts Expense
Total
for Doubtful Accounts
Less Allowance
Accounts Written-Off
Required Allowance
Doubtful
Account
ExpenseEnding
Accounts
Receivable
Allowance
DoubtfulAccounts
Accounts
Less Allowance
forfor
Doubtful
Net Realizable Value
Gross Receivables
Less
Allowance for Doubtful Accounts
Net Realizable Value
5%
25%
50%
15,000.00
100%
60,000.00
25,000.00
75,000.00
120,000.00
280,000.00
1,100,000.00
170,000.00 Allowance Beg Balance
30,000.00
55,000.00 Recoveries
345,000.00 Doubtful
Account Expense
55,000.00
545,000.00
30,000.00
30,000.00
345,000.00
30,000.00
30,000.00
30,000.00
1,250,000.00
50,000.00
1,200,000.00
170,000.00
375,000.00
545,000.00
265,000.00
280,000.00
345,000.00
345,000.00
3,270,000.00
280,000.00
2,990,000.00
2020
1.60%
Recoveries
2,000.00
3,000.00
5,000.00
10,000.00
10,000.00 Jan 1, 2021 Bad debts loss
20,000.00 Accounts Receivable
Doubtful accounts rate
Allowance for Doubtful Accounts
2021
1.70%
Jan 1, 2021
160,000.00
###########
1.60%
20,000.00
Dec 31, 2021
238,000.00
2,000,000.00
1.70%
34,000.00
Doubtful Account Expense
20,000.00 -->
Retained Earnings
Allowance for Doubtful Accounts
20,000.00
1/1/2021 Retained Earnings
20,000.00
Allowance for Doubtful Accounts
20,000.00
Gross Receivable 12/31/21
Allowance for Doubtful Accounts
Net Realizable Value
If you were required to prepare an adjusting entry for December 31, 2021, the entry will be
2,000,000.00
34,000.00
1,966,000.00
Notes Receivable
Inititial Measurement -->
Present Value
Short-term non-interest bearing note
Long-term Interest Bearing
Long-term Non-Interest Bearing
Accounts Receivable
Notes Receivable
Interest Income, if any
6-1 Feasible
Jan 1, 2021
Cash
Notes Receivable
Land
Gain on Sale of Land
Dec 31, 2021
Dec 31,2022
Jan 1, 2023
Face Value
Face Value
Present Value/Discounted Value
XXX
XXX
XXX
1,000,000.00
6,000,000.00
5,000,000.00
2,000,000.00
Interest Receivable
Interest Income
720,000.00
Interest Receivable
Interest Income
806,400.00
Cash
720,000.00
806,400.00
7,526,400.00
Notes Receivable
Interest Receivable
6-2 Bygone
Notes Receivable
Sales
Unearned Interest Income
6,000,000.00
1,526,400.00
600,000.00
540,000.00
60,000.00
Using Excel in computing Interest Rate
Year
Cash Flow
0 - 540,000.00
Face value of Notes
600,000.00
1 200,000.00
Less Cash Price
540,000.00
2 200,000.00
Imputed Interest
60,000.00
3 200,000.00
IRR
5.46%
Using IRR, compute for present value of the cash flows
Using interpolation method
Cash Flows
5% Present Value
6% Present Value
Present Value of Cash Flows
200,000.00
2.7232
544,649.61 2.673012 534,602.39
PVA of 1
2.70000
540,000.00
PV at 5%
Cash Price
PV at 6%
Present Value
544,649.61
540,000.00
534,602.39
Amortization Table using amortized cost model
4,649.61
Date
Payment
Interest
Principal
Present Value
10,047.22
Jan 1, 2021
540,000.00
Using Interpolation Effective Interest Rate = 5% + (6%-5%) X 4,649.61/10,047.22
5.46%
Dec 31, 2021
200,000.00 29,477.98
170,522.02 369,477.98
Dec 31, 2022
200,000.00 20,169.38
179,830.62 189,647.37
Dec 31, 2023
200,000.00 10,352.63
189,647.37
using 5%
Present Value of 1
(1 + i) ^ -n
Lumpsum Payment/One-time
0.863837599
Present of Ordinary Annuity of 1
[1 - (1 + i)^-n] / i
Equal Installment
2.723248029
i = interest rate
n = number of periods
at 5%
at 6%
0
1
1
1 0.952380952
0.943396226
2 0.907029478
0.88999644
3 0.863837599 PV of 1
0.839619283
2.723248029 PVA of 1
2.673011949
Apri 1, 2021 ABC Company sold an equipment costing P100,000 with a book value of P80,000, receiving P100,000, 180-day, 10% promissory note.
Notes Receivable
Accumulated Depreciation
Equipment
Gain on Sale
Assuming the note was paid
Sep 28, 2021Cash
Notes Receivable
Interest Income
Assuming the note was dishonored
Sep 29, 2021Accounts Receivable
Notes Receivable
Interest Income
100,000.00
20,000.00
100,000.00
20,000.00
105,000.00
100,000.00
5,000.00
105,000.00
100,000.00
5,000.00
Apri 1, 2021 ABC Company sold goods and receiving P100,000, 180-day, 10% promissory note.
Notes Receivable
100,000.00
Sales
100,000.00
A
M
J
J
A
S
29
31
30
31
31
28
180
Apri 1, 2021 ABC Company sold an equipment costing P1,000,000 with a book value of P800,000 and a fair value of P900,000 by receiving a promissory note.
Case 2.
P1,000,000 none interest bearing note payable in 4 equal annual payments.
The company uses outstanding balance method in amortizing the unearned interest.
Notes Receivable
Accumulated Dep'n.
Equipment
Gain on Sale
Unearned Interest Income
Fair Value/Proceeds
Less
Cost
Less A/D
Gain on Sale
1,000,000.00
200,000.00
(1M - 900T)
900,000.00
1,000,000.00
200,000.00
Dec 31, 2021Unearned Interest Income
Interest Income
Date
1/4/2021
1/4/2022
1/4/2023
1/4/2024
1,000,000.00
100,000.00
100,000.00
Outstanding
Balance
1,000,000.00
750,000.00
500,000.00
250,000.00
2,500,000.00
Fraction
100/250
75/250
50/250
25/250
800,000.00
100,000.00
30,000.00
30,000.00
Interest
Income
3 months
40,000.00
30,000.00
10,000.00
20,000.00
7,500.00
10,000.00
5,000.00
100,000.00
Apr 1, 2022 Cash
9 months
30,000.00
22,500.00
15,000.00
Total
Int Inc
for the year
30,000.00
2021
32,500.00
2022
22,500.00
2023
5,000.00
2024
250,000.00
Notes Receivable
250,000.00
Unearned Interest Income
Interest Income
10,000.00
Dec 31, 2022Unearned Interest Income
Interest Income
22,500.00
10,000.00
32,500.00
BS presentation - 2021
Current Assets
Face Value
Less Unearned Int
Carrying Value 12/31/21
Date
Collections
1/4/2022 250,000.00
1/4/2023 250,000.00
250,000.00
1/4/2024 250,000.00
10,000.00
1/4/2025 250,000.00
240,000.00
Non-current Assets
Face Value
Less Unearned Int
Carrying Value 12/31/21
750,000.00
60,000.00
690,000.00
Carrying Value of NR 12/31/21
930,000.00
22,500.00
Apr 1, 2023 Cash
250,000.00
Notes Receivable
250,000.00
Unearned Interest Income
Interest Income
7,500.00
Dec 31, 2023Unearned Interest Income
Interest Income
15,000.00
7,500.00
15,000.00
Apri 1, 2021 ABC Company sold an equipment costing P1,000,000 with a book value of P800,000 and a fair value of P900,000 by receiving a promissory note.
Case 2.
P1,000,000 none interest bearing note payable in 4 equal annual payments.
Using effective interest rate method of amortization
Date
Installment
Interest
Principal
Present Value
1/4/2021
900,000.00
1/4/2022
250,000.00
39,166.23
210,833.77
689,166.23
1/4/2023
250,000.00
29,991.16
220,008.84
469,157.39
1/4/2024
250,000.00
20,416.81
229,583.19
239,574.20
1/4/2025
250,000.00
10,425.80
239,574.20
-
Dec 31, 2021Unearned Interest Income
Interest Income
-
900,000.00
250,000.00
250,000.00
250,000.00
250,000.00
4.352%
29,374.67
29,374.67
Apr 1, 2022 Cash
250,000.00
Notes Receivable
250,000.00
Unearned Interest Income
Interest Income
9,791.56
9,791.56
Apri 1, 2021 ABC Company sold an equipment costing P1,000,000 with a book value of P800,000 receiving a 2-yr, P1,000,000, non-interest bearing promissory note.
The market rate of interest on this date for similar note of this type is 10%.
Installment
PV annuity Factor of 1 (1 - (1+i)^-n)/i
1.73553719
Face Value
1,000,000.00
Lumpsum - one-time PV of 1
(1+i)^-n
0.82644628
PV of 1 at 10% for 2 periods
(1.10^-2)
0.82645
Periods
PV Factor
Present Value = Selling Price = FV of equipment 826,446.28
1
1.00
0.909090909
Notes Receivable
1,000,000.00
2.00
0.826446281
Accumulated Depreciation
200,000.00
1.73553719 PVA
Equipment
1,000,000.00
Gain on Sale
(826,446.28 - 800,000)
26,446.28
Unearned Interest Income
173,553.72
Dec 31, 2021 Unearned Interest Income
Interest Income
(82,644.63 X 9/12)
61,983.47
BS presentation 2021
Non-current assets
Face Value
Unearned Interest Income
Carrying Value 12/31/21
61,983.47
Date
Interest Income Carrying Value
1/4/2021
826,446.28
1/4/2022
82,644.63
909,090.91
1/4/2023
90,909.09
1,000,000.00
Interest Income for 2022
Apr 1, 2022 Unearned Interest Income
Interest Income
20,661.16
Dec 31, 2022 Unearned Interest Income
Interest Income
68,181.82
1,000,000.00
111,570.25
888,429.75
88,842.98
20,661.16
BS presentation 2022
Current assets
Face Value
Unearned Interest Income
Carrying Value 12/31/22
68,181.82
Apr 1, 2023 Cash
1,000,000.00
Notes Receivable
1,000,000.00
Unearned Interest Income
Interest Income
22,727.27
Interest Income for 2022
1,000,000.00
22,727.27
977,272.73
88,842.98
22,727.27
Apri 1, 2021 ABC Company sold an equipment costing P1,000,000 with a book value of P800,000 receiving a P1,200,000, non-interest bearing promissory note
payable in 3 equal annual payments .
The market rate interest on this date for similar note of this type is 12%.
Annual Installment (P1,200,000 / 3)
PVAF of 1 at 12% for 3 periods
Present Value of the Notes = SP = Fair Value
Period
1.00
2.00
3.00
400,000.00
2.40183
960,732.51
PVAF
Notes Receivable
Accunulated Depreciation
Equipment
Gain on Sale
Unearned Interest Income
Dec 31, 2021Unearned Interest Income
Interest Income
Date
Installment
1/4/2021
1/4/2022
400,000.00
1/4/2023
400,000.00
1/4/2024
400,000.00
1,200,000.00
Apr 1, 2022 Cash
Notes Receivable
PVF
1.0000
0.8929
0.7972
0.7118
2.4018
1,200,000.00
200,000.00
1,000,000.00
160,732.51
239,267.49
86,465.93
86,465.93
Interest
115,287.90
81,122.45
42,857.14
239,267.49
Principal
Carrying Value
960,732.51
284,712.10
676,020.41
318,877.55
357,142.86
357,142.86
0.00
960,732.51
400,000.00
FV
Less Unearned
1,047,198.43 CV 12/31/21
400,000.00
Unearned Interest Income
Interest Income
28,821.98
Dec 31, 2022Unearned Interest Income
Interest Income
60,841.84
28,821.98
60,841.84
Total
Current
Non-current
1,200,000.00
400,000.00 800,000.00
152,801.57
28,821.98 123,979.59
1,047,198.43
371,178.02 676,020.41
Current
371,178.02
Non-current
676,020.41
Present Value of Notes = SP = Fair Value
Less BV
Loss on Sale
-
Interest Income 2020 (712,000 X 12%)
Assignment of Receivable
8-3
Non-notification - The assignor continues to make the collection.
May-01 Accounts Receivable - Assigned
800,000.00
Accounts Receivable
800,000.00
712,000.00
800,000.00
88,000.00
85,440.00
CV of Note 12/31/20
Cash
Service Charge
Notes Payable - Bank
797,440.00
Interest Income 2021 (797,440 X 12%)
95,692.80
Period
893,132.80
107,175.94
1,000,308.74
Date
Interest
CV
1/1/2020
712,000.00
12/31/20
85,440.00
797,440.00
12/31/21
95,692.80
893,132.80
12/31/22
107,175.94
1,000,308.74
Cash received
CV 12/31/20 PV of remaining 9 payments
Sales Revenue
(1,000,000 X 6.25)
Interest Income 2021 (6,250,000 X 8%)
1
0.925926
0.857339
0.793832
0.73503
0.680583
0.63017
0.58349
0.540269
0.500249 PVFAD
0.463193 PVAF
7.246888 6.246888
6.710081
PVFAD
PVAF
(1-(1+i)^-(n-1))/I + 1
(1-(1+i)^-n)/i
5,750,000.00 4)
640,000.00
Accounts Receivable - Assigned
Cash Advance Rate
Loan Value
Less Service Charge
Proceeds from assignment
7.25
6.71
7,250,000.00
500,000.00 3)
CV of Notes 12/31/21
Pledge of Receivable
8-1
Mar-01 Cash
Notes Payable
1,000,000.00
6,250,000.00 2)
7,250,000.00 1)
PV
0
1
2
3
4
5
6
7
8
9
10
620,000.00
20,000.00
May-05 Sales Returns
Accounts Receivable - Assigned
30,000.00
May-10 Cash
Sales Discount
Accounts Receivable - Assigned
490,000.00
10,000.00
Jun-01 Notes Payable - Bank
Interest Expense
Cash
(CV 12/31/20 X (1 + i) - Installment = CV 12/31/21
800,000.00
80%
640,000.00
20,000.00
620,000.00
30,000.00
500,000.00
490,000.00
12,800.00
502,800.00
2,000,000.00
2,000,000.00
Jun-07 Allowance for Doubftul Account
Accounts Receivable - Assigned
980,000.00
20,000.00
Apr-01 Cash
Sales Discount
Accounts Receivable
Jun-20 Cash
1,000,000.00
10,000.00
10,000.00
200,000.00
Accounts Receivable - Assigned
2,000,000.00
Accounts Receivable
Sep-01 Notes Payable
Interest Expense (2M X 12% X 6/12)
Cash
8-2
200,000.00
2,000,000.00
Jun-01 Cash
Jul-01 Notes Payable - Bank
Interest Expense
Cash
2,000,000.00
120,000.00
3,600,000.00
400,000.00
Initial Loan Balance
Less Payment
Outstanding loan balance
Interest Rate/mo
Interest Expense
Outstanding loan balance
Cash Payment
4,000,000.00
300,000.00
300,000.00
Sep-01 Cash
Notes Payable - Bank
Interest Expense
Accounts Receivable - Assigned
8-8
1,125,000.00
1,500,000.00
75%
8-7
Notification - the bank makes the collections
1,125,000.00
Jul-01 Accounts Receivable - Assigned
800,000.00
60,000.00
Accounts Receivable
1,065,000.00
800,000.00
800,000.00
22,500.00
22,500.00
168,500.00
325,000.00
6,500.00
500,000.00
Initial Loan Balance
Less Payment
Outstanding loan balance
Interest Rate/mo
Interest Expense
Outstanding loan balance
Total
Collection
Cash remitted by the bank
Accounts Receivable
Accounts Receivable - Assigned
1,500,000.00
1,065,000.00
60,000.00
Accounts Receivable - Assigned
Cash Advance Rate
Loan Value
Less Service Charge (4% X 1,500,000)
Proceeds from assignment
Interest Expense
Cash
Accounts Receivable
Accounts Receivable - Assigned
4,000,000.00
8-4
Notification - the bank makes the collections
Jul-01 Accounts Receivable - Assigned
1,500,000.00
Accounts Receivable
Aug-01 Notes Payable - Bank
Accounts Receivable - Assigned
4,000,000.00
300,000.00
3,700,000.00
100,000.00
Interest Expense
Discount on Notes Payable
Cash
Service Charge
Notes Payable - Bank
Under current liability
Notes Payable
Discount on Notes Payable
Less
4,000,000.00
Notes Payable Dec 31, 2021
100,000.00
Dec-31 Interest Expense
Discount on Notes Payable
2022
Oct-01 Notes Payable
Cash
153,000.00
2,120,000.00
Maturity Value = Face Value + Interest
Maturity Value = Face Value, if the note is non-interest bearing.
4,000,000.00
Maturity Value
10%
Discount Rate
400,000.00 (Discount = MV X Discount Rate X Discount Time)
Discount on Notes Payable
2021
Oct-01 Cash
Discount on Notes Payable
Notes Payable
150,000.00
3,000.00
1,125,000.00
800,000.00
325,000.00
2%
6,500.00
325,000.00
331,500.00
500,000.00
168,500.00
200,000.00
200,000.00
Cash
Service Charge
Notes Payable - Bank
800,000.00
616,000.00
24,000.00
640,000.00
Accounts Receivable - Assigned
Cash Advance Rate
Loan Value
Less Service Charge
Proceeds from assignment
800,000.00
80%
640,000.00
24,000.00
616,000.00
Aug-01 Notes Payable - Bank
Interest Expense
Accounts Receivable - Assigned
413,600.00
6,400.00
Sep-01 Cash
Notes Payable - Bank
Interest Expense
Accounts Receivable - Assigned
91,336.00
226,400.00
2,264.00
420,000.00
320,000.00
Initial Loan Balance
Less Payment
Outstanding loan balance
Interest Rate/mo
Interest Expense
Outstanding loan balance
Total
Collection
Cash remitted by the bank
640,000.00
413,600.00
226,400.00
1%
2,264.00
226,400.00
228,664.00
320,000.00
91,336.00
Factoring
60,000.00
60,000.00
60,000.00
60,000.00
AR - Assigned
800,000.00
30,000.00
500,000.00
10,000.00
200,000.00
800,000.00
740,000.00
60,000.00
Casual Factoring
Receivable Factored
6,000,000.00
Commission 15%
- 900,000.00
Factor's Holdback 10%
- 600,000.00
Proceeds from Factoring
4,500,000.00
Less Carrying Value of Receivable Factored
Receivable Factored
6,000,000.00
Factor's Holdback 10%
- 600,000.00
Allowance for Doubtful Accts. - 200,000.00 5,200,000.00
Loss from Factoring
- 700,000.00
Cash
Receivable from Factor
Loss from Factoring
Allowance for Doubtful Accounts
Accounts Receivable
Cash
4,500,000.00
600,000.00
700,000.00
200,000.00
6,000,000.00
600,000.00
Receivable from Factor
8-10
Jun-01 Accounts Receivable
Sales
Jun-03 Cash
Commission / Loss on Factoring
Receivable from Factor
Sales Discount
Accounts Receivable
Receivable Factored
Less Commission
Factors Holdback
Sales Discount
Proceeds from Factoring
Jun-09 Sales Returns and Allowance
Receivable from Factor
Sales Discount
600,000.00
500,000.00
500,000.00
340,000.00
25,000.00
125,000.00
10,000.00
500,000.00
500,000.00
25,000.00
125,000.00
10,000.00
160,000.00
340,000.00
50,000.00
49,000.00
1,000.00
Jun-11 No entry
Jun-15 Cash
76,000.00
Receivable from Factor
Accounts Receivable
Accounts Receivable - Assigned
640,000.00
490,000.00
150,000.00
2%
3,000.00
150,000.00
153,000.00
76,000.00