Chapter 1 Problem 6-15
1. Cash 150,000
Service charge (5% x 200,000) 10,000
Receivable from factor (20% x 200,000) 40,000
Accounts receivable 200,000
2. Accounts receivable – assigned 300,000
Accounts receivable 300,000
Cash 225,000
Service charge (5% x 300,000) 15,000
Note payable – bank 240,000
3. Doubtful accounts 35,000
Allowance for doubtful accounts 35,000
Required allowance (5% x 1,300,000) 65,000
Less: Allowance – January 1 30,000
Doubtful accounts 35,000
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4. The net realizable value of the accounts receivable is included in trade and other
receivables and presented as current asset.
Accounts receivable – unassigned 1,000,000
Accounts receivable – assigned 300,000
Total 1,300,000
Less: Allowance for doubtful accounts 65,000
Net realizable value 1,235,000
The receivable from factor of P40,000 is also included in trade and other receivables.
The note payable – bank of P240,000 is classified and presented as current liability.
However, the company should disclose the equity in assigned accounts as follows:
Accounts receivable – assigned 300,000
Note payable – bank (240,000)
Equity in assigned accounts 60,000
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