Reference no: EM132909163
On May 1, 2020, ABC Incorporated discounted their 12 month, 10% note amounting to 5,000,000 at a bank for 12% on a with recourse basis. The note was received from a customer on December 1, 2019. Upon its maturity, the note was eventually collected by the bank.
Problem a. If the discounting is accounted for as a secured borrowing, how much loss shall be recognized by ABC on May 1?
Problem b. If the discounting is accounted for as a conditional sale, by how much would the liability account of ABC increase on May 1?
Problem c. If the discounting is accounted for as a secured borrowing, give the entry to record transactions on May 1, 2020.
Problem d. If the discounting is accounted for as a conditional sale, give the entry to record transactions when the note was eventually collected.