Pepper, Inc. had the following receivable financing transactions in 2021: a) At the beginning of November, Pepper, Inc. assigned P2,000,000 out of its P10,000,000 outstanding accounts receivables to Metrobank in consideration of a P1,500,000, 12% loan. Metrobank charged the company 5% of the loan principal as service charge. By the end of November, Pepper collected P600,000 cash from the assigned accounts net of a P50,000 sales discount. Also, by the end of November, Pepper accepted from customers merchandise originally invoiced at P60,000 as returns. By the end of December, Pepper collected another P700,000 from the assigned accounts after P40,000 sales discount. The company wrote-off P80,000 of the assigned accounts as worthless. The agreement with Metrobank calls for monthly remittance of customer collections for the month. The collections will cover both interest and loan principal. b) Also, at the beginning of November, Pepper, Inc. factored another P500,000 of its accounts receivables to Metrobank. As of the date of factoring, it was ascertained that P20,000 of the accounts receivable is doubtful of collection. Metrobank advanced P350,000 cash to Pepper and withheld P50,000 as factors holdback (to cover future sales discount and sales returns and allowances). The company incurred P10,000 direct transaction costs (legal fees and other professional fees) related to the factoring. The factoring was done on a without-recourse basis, thus transferring all significant risks and rewards related to the receivables to Metrobank. Required: 1) Journal entries to reflect the transactions. 2) Determine the balances of the following accounts as at December 31, 2021: a. Accounts receivable-assigned b. Loans payable 3) How much is the gain or loss to be reported in the 2021 profit or loss from derecognition of any receivables?
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Pepper, Inc. had the following receivable financing transactions in 2021:
a) At the beginning of November, Pepper, Inc. assigned P2,000,000 out of its P10,000,000 outstanding accounts
receivables to Metrobank in consideration of a P1,500,000, 12% loan. Metrobank charged the company 5% of the loan principal as service charge. By the end of November, Pepper collected P600,000 cash from the assigned accounts net of a P50,000 sales discount. Also, by the end of November, Pepper accepted from customers merchandise originally invoiced at P60,000 as returns.
By the end of December, Pepper collected another P700,000 from the assigned accounts after P40,000 sales discount. The company wrote-off P80,000 of the assigned accounts as worthless.
The agreement with Metrobank calls for monthly remittance of customer collections for the month. The collections will cover both interest and loan principal.
b) Also, at the beginning of November, Pepper, Inc. factored another P500,000 of its accounts receivables to Metrobank. As of the date of factoring, it was ascertained that P20,000 of the accounts receivable is doubtful of collection. Metrobank advanced P350,000 cash to Pepper and withheld P50,000 as factors holdback (to cover future sales discount and sales returns and allowances). The company incurred P10,000 direct transaction costs (legal fees and other professional fees) related to the factoring. The factoring was done on a without-recourse basis, thus transferring all significant risks and rewards related to the receivables to Metrobank.
Required:
1)
2) Determine the balances of the following accounts as at December 31, 2021:
a. Accounts receivable-assigned
b. Loans payable
3) How much is the gain or loss to be reported in the 2021 profit or loss from derecognition of any receivables?
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
