Understanding Receivables: Key Concepts and Multiple Choice
School
Las Pinas City National Science High School**We aren't endorsed by this school
Course
AC 123
Subject
Accounting
Date
Dec 11, 2024
Pages
21
Uploaded by ElderTitaniumVulture26
Chagter 2. Recclvables ¥ MC1 et MC2 ) MC3 MC4 An entity affiliated \.’L C. d. MULTIPLE CHOICE QUESTIONS should report receivable from officers, “mployeq, . companies in the statement of financial positig, as current assets, if collectible within twelve monthg, non-current assets only. . . trade notes and accounts receivable if they °'h°rwi-,t qualify as current assets. offsets to capital. Which of the following is not a_va]id basis for using trad, discounts as adjustment to list price? a. (]).) [+ d. To avoid frequent changes in price catalo}gsi / To encourage collection of account within a Specifieq period. To make price differentials among different classeg of customers. To encourage customers to buy in big quantities. Under the allowance method of recording cash discounts, an entity records sales discounts when it offers the discount at the date of sale. when it collects the account within the discount perjod, when the customer does not pay within the discount period. when the customer pays beyond the discount period. If a company employs the gross method of recording accounts receivable from customer: taken as (a) 4 b. s, it should Teport sales discounts a deduction from sales in the st income. an item of "other expense” in comprehensive income. a deduction from accounts receivable in determining the net realizable value of accounts receivable, a deduction from the cost of goods sold in the statement of comprehensijye income, atement of comprehensive the statement of 142
MC5 MC6 MC7 Mmcs Chapter 2 - Receivap;, es If a company employs the net method 3 receivable from customers, it should r:;::tc?:l:gda‘ccounm 'S discounts not taken as @ a deduction from sales in the statement of comprehensi ensive income. b. an item of other -expense in the statement comprehensive income. of item of other income in the statement of G o= - comprehensive income. @/ a deduction from the gross accounts receivable to am,e' at amortized cost. recognition basis of a non-interest-bearing What is the initial hange for property? note received in exc @.7 At fair value of the property or note At maturity value of the note Kc.‘-’ At face value of the note cfi ‘At the carrying amount of the property f 2020, Evans Company received a three- bearing P600,000 note receivable for The market rate for equivalent notes was s reported this note as charge to notes o sales revenue for P600,000. What for the note have on Evans' profit for s retained earnings at the end of At the beginning o year zero-interest-| merchandise sold. 8% at that time. Evan receivable and a credit effect did this accounting 2020, 2021, 2022, and it 2022, respectively? understate, understate, understate (E.:) Overstate, b. Overstate, overstate, overstate, overstate Overstate, overstate, understate, no effect © d. Overstate, understate, understate, no effect An entity uses the allowance method of accounting for uncollectible accounts. What is the effect on profit and amortized cost of accounts receivable of the entry to write offa customer’s account? Amortized Cost @\ Profit " of Accounts Receivable b. None None c. Decrease - Decrease d Increase Increase : Decrease None 143
Chapter 2 - Receivables , Y Mco MC10 MCI11 MC12 When the allowance method of recognizing “’;°°llle°fi_ble accounts expense is used, the entries at the time of collection of an account previously written off would increase profit. decrease profit. a. b. (g increase the allowance for u d) increase the amortized cost © le accounts. collectib] n ivable. f accounts 1ece al amount determined by an tations based on an aging of the total peso balance 5% of the total peso due and so on? - How would you describe the tot: entity in this series of _compu schedule of accounts receivable: 2% ’ of accounts from 1-60 days past due, P’ ust balance of accounts from 61-120 days pas ectible accounts expense ive income It is the amount of uncoll for the allowance reported in the statement of cornprehens b. It is the amount of the adjusting entry for uncollectible accounts at yea.r-end. / It is the required credit balance of the " uncollectible accounts at year-end. d. This amount plus the total amount of accounts written off during the year is the amount of uncollectible accounts a. allowance for expense. Which form of receivables financing is equivalent to an absolute sale of accounts receivable? a. Pledge of accounts receivable b. Assignment of accounts receivable c d Factoring Discounting of notes receivable Which o_f the following is not a required disclosure for loans and receivables? a. The names of the debtors who defaulted on the payment - of their loans or accounts b. The criteria for r iti ecognition i The o g and basis of measurement c. }VIatenal items of income and expense and gains and q _I?;ses resulting from receivables . e nature and am i i i i et - ount of impairment loss recognized it 144
MC13 MC14 MC15 McCi6 Chapter 2 - Receivables Which of the following statements is true? a. When individual customers’ accounts h balances of material amounts, these amoumasve credit deducted from the debit balance in other cumust be accounts in the statement of financial position, stomers’ b. Sales revenue is increased by a rec : previously written off. v overy of an account A non-interest-bearing promissory note is measured the statement of financial position at face value less t::n amount of unamortized discount. N d. It is appropriate to measure the impairment on receivable based on recognized sales or other revenues. Which of the following shall an enterprise taken consider when measuring and recognizing impairment loss on receivables? Past experiences on the collectability of the receivables Present condition of the debtor, including the present economic environment. Future expectations based on information available I II. 1L without undue cost and effort. a. I only b. II only c. Iand II . d. I, I and III A company writes off as uncollectible an account receivable from a bankrupt customer. The company has an e‘xdequ_ate amount in its Allowance for Bad debts. This transaction will decrease profit for the period. a. b. decrease total current assets. . c. decrease the amount of owners’ equity. d. have no effect on total current assets- . iately . . ivable was immediate! A 60-day, 6% interest-bearing note recew;;ls received from the discounted at a bank at 8%. The proce bank upon discounting would be the count at 8% maturity value less the dis b maturity value less the discount at 6% scount at 8%. maturity value plus the di face value less the discount goop at 8%- 145
Chapter 2 - Receivables >s%V[C17 \/ MC18 MC19 MC20 A 120-day, 6% interest:bearing note receivable i'es discoumm to a bank at 8% after being held for 45 days. The Proceeq, received from the bank upon discounting would be the maturity value less the discount at 8%, for 120 (!"yu. maturity value less the discount at 85; for 45 days, maturity value less the discount at 8“A. for 75 days, maturity value less the discount at 6% for 75 days. aoop The account credited when a note receivable is discounteg with recourse is ‘a. Liability on discounted notes. b. Notes receivable. c. Accounts receivable. d. Allowance for discounted notes. The following data are given for Mazda, Inc.: Cash Credit Total Cost of sales P50,000 P450,000 P500,000 Cash received from customers 65,000 585,000 650,000 Assuming merchandise was marked to sell as follows: Cash sales, at 30% above cost and credit sales, at 40% above cost, all of which are collectible. The balance of accounts receivable at the end of the period was yeok x . . © 30‘:) a. P12,500 (Seck by P45,000 T c. PI135,000 Yok d. P147,500 = Expedition Company sold merchandise on credit with a list prict of P105,000 and a trade discount of 10%. Terms were 2/10 f‘/:,fo‘ Which of the following entries is correct, given th indicated method of accounting for cash discounts? a. Gross Price Method Accounts Receivable 105,000 Sales ' 105,000 b. ,(\Emss Price Method Ccounts Receivable 92,610 Sales 92,610 Wot did ock v g, = e bawag pTw.w! G5k 7%= (g 146 = llf,(k
MC21 MC22 Chapter 2 ”"'"ll'llhlng c. Net Price Method Accounts Receiviable 99,400 Salen 9500 0 (‘l '\’ Net Price Method p Accounts Receivable 92,010 Salen 92,0610 (Ihil. CPA Adapted) Outlander Company sold on credit merchandise having o lint price of P200,000 with the following termu: trade l“li'.l;lllll of 10% and 5%; cash discount of 3% if the account s paid within 10 days from the invoice date; full amount s due in 30 days, Which of the following entries in correct, 1o record the collection of the account, given the indicated method of accounting for cash discounts? a. Gross Price Method Cas 165,870 Accounts Receivable 165,870 b. Net Price Method — ( (aw () Cash 165,870 Sales Discounts 5,130 Accounts Receivable 171,000 (e Net Price Method Cash 171,000 7 Sales Discounts Forfeited 5,130 Accounts Receivable 165,870 d. Gross Price Method Cash 194,000 Sales Discounts 6,000 200,000 (Phil. CPA Adapted) Accounts Rece Civic Company had the following information relating to its accounts receivable: Accounts Receivable at 12/31/21 4” ’300‘088 Credit sales for 2022 5,400,0 Collections from customers during 2022 50,000) (including recovery of P25,000) 4"1725'0()0) Accounts written off on 9/30/22 i ( 2;‘,'000 Collection of accounts written off in prior years ’ Estimated uncollectible receivables per aging at 165,000~ 12/31/22 147
Chapter 2 . Receivables “Mc23 MC24 MC25 ' At December 31, 2022, Civic Company’s accounts recejygy before allowance for uncollectible accounts, should be ) a. P1,825,000 . 1,850,000 c. 1,950,000 d. 1,990,000 You obtained the following information relating to Sentry Trading, a general merchandising company: Rate of gross profit on sales 20% Accounts Receivable, December 31,. 2021 P 80,000 Collections on accounts receivable in 2022 430,000 Cost of goods available for sale in 2022 460,000 100,000 Merchandise Inventory, December 31, 2022 Assuming all sales were on account, what was the company’s Accounts Receivable balance on December 31, 20222 293 a. P120,000 16Uk (b P100,000 (jook) yeok c. 90,000 L% =~ d. P50,000 ot P rove) ~ opk- Accounts Receivable for Tamaraw Company at December 3], 2022 showed a balance of P1,500,000. The Allowance for Expected Credit Loss had a P45,000 debit balance before the year-end adjustment. Sales during the year totaled P12,500,000. An aging analysis shows that P75,000 of the outstanding accounts receivable are estimated to " be uncollectible. How much is the Impairment Loss (Bad Debts Expense) for 20227 §r, 00 a. P30,000 1S OV, b. P45,000 e ¢ P75000 12elc @,' P120,000 You obtained the following accounts from Lancer Clempaf‘}"s unadjusted trial balance on December 31, 2022: ) Debit Credit Accounts Receivable 1,000,000 Allowance for Bad Debts " 8,000 Net credit sales ' ’ P3,000,000 148
Chapter 2 - Receivables estimates that 3% of the gross accounts "(L':'L;,rnding will become uncollectible. receivable oul® _ adjustment on December 31, 2022, what is the bal, after B ance for bad debts? ance of the My DD Ze = £90,000 K & pg2,000 - p 138,000 Jo £ p30,000 . 6 Use the same information given in MC25. How much bad debts MC: expense is reported in Lancer's Statement of Comprehensive Income for year ended December 31, 2022? Lo s @ P38,000 L 4 P30,000 & = (AICPA Adapted) MC27 Corolla, Inc. prepared an aging of its accounts receivable at December 31, 2022 and determined that the amortized cost of the receivables was P250,000. Additional information is ‘available as follows: Allowance for Bad Debts, 1/1/22 - credit balance &’28,000) Accounts written off as uncollectible during 2022 23,000 Accounts Receivable at 12/31/22 270,000 -260€ < 2ok Uncollectible accounts recovery during 2022 (5,000) What is Corolla, Inc.’s bad debts expense for the year 2022? Zk a. P23,000 b. P20,000 [ P15,000 d. P10,000 MC28 Vanette Company recorded Impairment Loss on its receivable of \ P20,000 during 2022. The allowance for expected credit loss )< had a balance of P17,500 on December 31, 2021. During the year 2022, Vanette wrote off P30,500 of uncollectible receivables and recovered P8,050 of accounts written off in prior years. 149 e
Chapter 2 - Receivables How much will be the allowance for cxpectcd credit loss at December 31, 2022? a. P7,000 b. P15,050 c. P19,050 d. P45,550 relating to’ accounts MC29 Galant Company has the following data 2: receivable for the year ended December 31,2022 P 480,000 Accounts Receivable, January 1, 20222022 -19,200 Allowance for Bad Debts, January 1, [0 W) Sales during the year, all Ofl/ ;‘éc"““" + 2,400,000 terms: 2/10, 1/15, 1 . ) Cash received f/rum customers during the year LZ’Sr?g'ggg‘ uring the year C SwoD o0 Accounts written off d mers during the year m customers availing the 10-day discount period, p792,000 from customers availing the 15-day discount period, P4,800 rcpresented rz_aco;e?/ of accounts written off, and the balancg was Irece&ve rQ‘P ) customers paying beyond the discount period. 1Y |20V 3 A% Xl%= R 190k = M=% Galant’s year-end balance of allowance for bad debts was i estimated to be 5% of the outstanding accounts receivable as at December 31, 2022, based on the aging of the accounts. at is the accounts receivable balance at December 31, 2022? cash received from custo: An analysis of 1 X 1,411,200 was received fro; revealed that P Wh A P307,200 b, P270,400 c. P289,600 d. P265,600 MC30 Use th‘e same information given in MC29. How much was Galant’s bad debts expense for the year ended December 31, 20227 /a: P7,120 b. P8,080 c. P8,960 d. P11,920 (Phil. CPA Adapted) 150
Chagter 2- Receivables On March 31, 2022, Legend Company haq , ba]ance of P10,000 'in its allowance for expeage‘;n:dju:sted credit analysis of Legen.d S trade accounts receivab] redit loss, pp revealed the following: € at that date Mc31 Age Amount E ti . 0-30 days P600,000 . “"atedslg/nconecubne 31-60 days 40,000 ¥ to% e Over 60 days 20,000 P14 0?)0 Nk What amount should Legend report as allow Yok . o b anc credit loss in its March 31, 2022 statement of fi“a‘féif:fpzfiff @) P48,000 5. P40,000 C. P38,000 d. P30,000 MC32 During 2022, the CRV Company wrote off uncollectible accounts of P7,500 and recovered accounts of P3,700 that had been written off in 2021. " In addition, the following information is available: Accounts Receivable Amortized Cost December 31, 2021 P375,000 ., ~ P362,500 (]>-Tk) December 31, 2022 500,000 — 480,000 Jolék 7T The uncollectible accounts expense for the year 2022 is (%K a. P 8,700 R b. P11,300 ~=2 c. P16,200 ' d. P20,000 ‘MC33 On December 31, 2022, Pajero Corporation sold eqmprgxent to Safari Company for P100,000. Pajero accep.ted a IOA? note‘ receivable for the entire sales price. This note is payable 1rtl twl?1 equal installments of P50,000 plus accrued mtelieszozz December 31, 2023 and December 31, 202'4. On Jl:;lyof,].Q% ; Pajero discounted the note at a bank at a discount rate . i ote were Pajero Corporation’s proceeds from the discounted n 4 cop =BL a. P48,400 okxs ;’f B 83K b. P49,350 Tk x 66 —{1t c. P50,350 e p & P51,700 (AICPA Adapted) 151
Chapter 2 - Receivables i ipment costj MC34 On January 1, 2022, Audi Corporation sold g?‘;‘lf’ég’ooo."it“;g. P380,000 and with accumulated deapirecgag:go’ooo nOn-interesJ received as consideration for the sai¢, was no establisheq T ¥ bearing note, due January 1, 202(5@;?‘;]8 mote had 1o ready v exchange price for the equipmen o w note of this type &, of interes The present value of 1 at 10% for market. The prevailing rate January 1, 2022 was 10%. . three periods is 0.75. - rehensive income, how much In Audi’s 2022 statement of comp should be reported as interest income = e a. P140,000 Jwk * "czlz"’ ey b. P33,000 wvle Y ° Hiz c) P30,000 d P13,500 i i i in MC34. What is the carrying MC35 Use the same information given in L 2022 statement of amount of the note at Audi's Deceml ; e 3 financial position? . (1 ' b 79\;};( a. P270,000 wovky P ? 3 b. P300,000 L c., .P330,000 4 @ P400,000 MC36 On December 1, 2022, the State Finance Company gave Conanan Company a P2,000,000, 12% loan. Conanan Company Y received proceeds of P1,940,000, after deduction of non- refundable finance and other processing charges of P60,000. Principal and interest are due in 60 monthly installments of P44,500 beginning January 1, 2023. The repayment yields an effective interest rate of 13.4% based on the proceeds of P1,940,000. State Finance Company has the intention of collecting the contractual cash flows from this loan over the full te:im of the loan, thus, does not elect to measure this at fair value. What amount of interest revenue should State Finance Company recognize for the year 2022 as a result of this loan? 1/, S dvA yc pYT ¥ o 2 2pen b P20,000 ! / = 7 P21,663 o P22,333 152
Chapter 2 - Receivables MC37 Use the same information given in MC36. How much Interest Receivable should State Finance record on December 31, 20237 %0 MYV | = e P20,000 i . P21,663 d. P22,333 (AICPA Adapted) MC38 Jack Company sold a tract of land with carrying amount of P3,000,000 to Gorgeous Company on July 1, 2022. P1,200,000 was collected on the date of sale, and the balance of P2,800,000 is collectible in four equal annual installments of P902,500, consisting of principal and 11% interest on the unpaid balance. The first annual installment is due on July 1, 2023. What amount relating to the notes receivable should Jack classify as current assets on December 31, 2023? 2.8M <SAUTL = 280TCN a. P504,500 bk Lol 3 b. P659.895 i ufi_m( e P781,198 mm(yo/hf_! 303 4. P902,500 188 — MC39 Use the same information givén in MC38. How much is interest income for the year ended December 31, 2023? a P121,303 e XUt gy b, P154,000 UG 121 3°32 e P275,303 — d. P308,000 by iz = MC40 Starrex Company received from a customer a one-year, McC41 P500,000 note bearing annual interest of 8%. After holding the note for four months, Starrex discounted the note, with recourse, at Asian Bank at a discount rate of 10%. At the date of discounting, Starrex would receive cash of CLok ¥ & % HO0H 7 o0l . P50,000 / > P504,000 ok Y > 2 i»,!:L 9 C. P522,000 SUYk d. P540,000 < Carnival Company found itself in financial difficulties qnd decided to use its accounts receivable as a means ?f obtaining cash to continue operations. On July 1, 2022, Carnival factored 153
Chapter 2 . Receivables MC42 ( MC43 )’ :\;5‘({'(:00 of accounts receivable for cash proceeds of Peys bad debt allowance was associated with these accounty,” %, On December 17, 2022, Carnival assigned the remainder of . accounts receivable, P2,500,000 as of that date, as collatery) My a P1,250,000, 12% annual interest rate loan from Westy, on Company. Carnival reccived P1,250,000 less 2% finance Cha\rzrcu Additional information is as follows: Allowance for Bad Debts, 12/31/22 (unadjusted) - P 32,000 Accounts Receivable (not including factored and - assigned accounts), December 31, 2022 - P500,00 Estimated uncollectibles, 12/31/22 - 3% of Accounts Receivap), Of the assigned accounts, P300,000 had been collected by the end of the year. How much were the proceeds from factoring and genery assignment of the accounts receivable? bRk (WAYS a. P3,145,000 DENx 2y 412N P [LZWU_ (b‘/ P1,920,000 M c. P1,895,000 i d. P1,225,000 = Use the same information given in MC 41. Assuming that these are the only transactions affecting receivables, how much is the bad debts expense for the year ended December 31, 2022? ook +22M ¥ 0% = 1 /< a. P90,000 2 b. P81,000 . (228) c. P58,000 Y74 4. P49,000 = On January 2, 2022, Global Finance, Inc. extended a 3-yeah P500,000 loan to G Company. Interest on the loan is 7% payable annually every December 31. The first interest payment was made by G Company on December 31, 2022 however, the credit information obtained by Global Finance, Inc. for G Company as of December 31, 2022, indicated a probabfli‘y of default for the next 12 months at 5% and Global expect! to collect only 90% of the principal loan. On December 31, 2023, P35,000 interest was received by Glob:]{ Finance, Inc. from G Company. On this date, the probabiliy 0 default over the remaining two years of the loan increasef !i‘ ount ™ 10% and the expected recovery of the principal am 154
MC44 MC45 . £ Chapter 2 — Receivables to only 70%. There is no objective e i Vidence of le impairment at this time. reduced receivab What is the amount of allowance for expected cre : dit losses orted in Global Finance, Inc.’s statement of financij ot al position at December 31, 20227 a. P127,623 b. P119,050 c. P114,025 d. P102,623 Use the same information given in MC43, how much impairment loss is reported in Global Company, Inc.’s profit or loss for the year ended December 31, 2023? a. P127,623 b. P168,677 c P282,055 d P296,300 Capshell, one of Gold Company’s credit customers, is experiencing financial difficulties and a downward trend in its financial performance. The firm is unable to service its debts and as a result has missed the payment of its note and accrued interest with Gold Company. The principal amount of the note is P500,000 (which is already due) with annual interest of 10% payable annually. Accrued interest balance at December 31, 2022 is P50,000. Capshell management has negotiated a modification of its debt terms with Gold Company. At this time, the prevailing market rate of interest for similar transaction remained at 10%. ' Gold Company agreed to the following new terms: * Forgive the accrued interest at December 31, 2022 Extend the payment of the principal for two years Reduce the interest rate (payable annually) to 8% How much impairment loss should be recognized by Gold Company on December 31, 20227 a Zero (oot 4 ik = ( 9F2-ft‘) oopm o gegues NN ) ’ x . r P S & P103 744 adb T 470 e 155
N Chapter 2 - Receivables MC46 On December 31, 2022, the Reliable Finance Company had , P5,000,000 note receivable from Burgundy Company. - The note bears 10% interest. The books reported accrued interest of P500,000 on this date. Because of financial distress being suffered by Burgundy Company, Reliable Finance agreed to the restructuring and modification of the terms of its loan tq Burgundy as follows: ' o~ Reduction of principal to P4,000,000; ) o Reduction of interest to 8% payable annually beginning December 31, 2023; . o Accrued interest on December 31, 2022 is condoned; and e Principal payment was reset to December 31, 2024, The prevailing market rate of interest for similar obligations on the date of restructuring decreased to 9%. Use present value factors rounded to two decimal places. How much impairment loss should Reliable Finance Company record on December 31, 2022 as a result of the restructuring? a- P1,623,200 QM gt B P1576:800 (M b =(3.320M) DonEma e Gas e ’ 4 /L(LZ;ZZfl/ MC47 Use the same information given in MC46. At what amount would the restructured notes receivable be reported at December 31, 2022 My 82 = 3.308N a. P5,500,000 Yy 8% x/7y =T O b, P4,640,000 —— c. P3,923200 387¢ # ([d. P3,876,800 —=
— | ACT&S-QUIZ NO.2 0, \ NAME: ferrjal, dian Do Rege o ~seont: / | YEAR: el Jear SECTON: cotT-01- %024 DAL [I]oy)7) ‘ SETA I Multiple Choice: Write the letter of the correct answer before the number. } 1. ttis the financial flexibility or capability of an entity to raise money out of its receivables, d b, Assignment of accounts receivable c. Factoring d. Receivable financing e. Endorsement 4 ltmeans that the borrower called the assignor transfer firths in some accounts receivable to a lender / } d called the assignee in consideration for a loan. Receivable financing Factoring Assignment of accounts receivable Endorsement e a0 g d 3. Itis the amount appearing on the face of the note b. Net proceeds c. Maturity value d. Principal €. Discounted value o ‘il/.lt refers to the discounted value of the note received by the endorser from the endorsee. b. Net Proceeds c. Principal d. Maturity value e. Discount &~ These are claims supported by formal promise to pay usually in the form of notes b. Bank draft c. Notes Receivable d. Promissory note e. Invoice Q: Noninterest-bearing long-term notes are measured at which is the discounted value of ¢ the future cash flow using the effective interest rate. PNN‘C“* Valug,
) b - Face value €. Future value d. Present value €. Annuity value 7. B. Itis a financial asset ari 1 Itis unconditional promise inwriting made by one person to another 1o pay on demand or At a fixed determinab) T, signed by the maker, engag e future time a sum cert ing ain in money 1o order or to bearer b. Dishonored Note €. Promissory note d. Bank draft €. Notes receivable ising from a loan granted by a bank or other financial instisurion 0 or client, b. Loans receivable €. Accounts receivable d. Trade receivable €. Cash lmerest-beanng long-term notes are measured at which is actually th upon issuance, b. Present value ¢ Facevalye d. Fair value €. Amortized cost This account is deducted from the total Position with disclosyre of the contingent liability. Principal Allowance for doubtful accounts Notes receivable discounted Notes receivable dishonored 4 nran o The account credited when a note receivable is discounted with recourse i b, Accounts rec ¢ Notes receivable d. Allowance for discounted notes e. Liabil ity on discounted notes
g v 22 eceivable from officers, employees, or affiliated companies should be reported in the statement of financial position as 3. Non-current assets only. b. Current assets, if collectible within twelve months, ¢. Trade notes and accounts receivable if they otherwise qualify as current assets. R d. Offset to capital. ) c P3. Whatis the initial recognition basis ofa non-intelest-hearing note received in exchange for property? b. At maturity value of the note. ¢ Atface value of the note, @/ At fair value of the Property or note, €. Atthe carrying amount of the property, e 1% -Whi i inancing is equi K hich form of receivables financing is equivalent to an absolute sale of accounts receivable? b. Discoun(ing of notes receivable ¢ Pledge of accounts receivable d. Assignment of accounts receivable e. Factoring 8% after being held for 45 | ceived from the bank upon discounting would be 3. Maturity value less the discount at 6% for 75 days b. Maturity value less the discount at 8% for 120 days. / ¢ Maturity value less the discount at 8% for 45 days, . (4. Maturity value less the discount at 85 for 75 days, yo 2B Under the allowance method of recording cash discounts, an entity records sales discounts 3. When it collects the account within the discount period. il{' When it offers the discount at the date of sale. €. When the customer does not pay within the discount period. d. When the customer pays beyond the discount period. - tq, A company writes off as uncollectible an account receivable '{mm abar.\krup-( customer. The company © has an adequate amount in its Allowance for Bad Debts. This transaction will a. Decrease profit for the period. b. Decrease total current assets. (¢. Have no effect on total current asse\s: ’ "d. Decrease the amount of owner’s equity. | i i i i the entries at the i he allowance method of recognizing uncollectible accounts expense s used, | 30. When the allow : 0 e q - time of coilection of an account previously wnne.n n;flw s |' a. Increase the amortized cost of accounts recewa( e. ; v : i s. b. Increase the allowance for uncollectible accoun \ c. Increase profit. d. Decrease profit.
g $9. 1f a company employs the gross method of recording accounts receivable from customers, it should { - d report sales discounts taken as a. A deduction from the cost of goods sold in the statement of comprehensive income. b. Anitem of “other expense” in the statement of comprehensive income. € Adeduction from sales in the statement of comprehensive income. d. - Adeduction from accounts receivable in determining the net realizable value of accounts ~ receivable. ‘; 1S \(Vhich of the following is not valid basis for usin, .~ (3 Toencourage collection of account within a b. To @ncourage customers to buy in big quant; ¢ Toavoid frequent changes in price catalogs. g trade discounts as adjustment to list price? specified period. ./ ities, . _d. Tomake price differentials among different classes of customers. 1) o @3 At the beginning of the current year, Mover of P5,000,000. The factor withheld 10% of tl i and other adjustments, An allowance for b | Mover Company in relation to these accou Company sold P5,800,000 in accounts receivable for cash he cash proceeds to allow for possible customer returns ad debts of P600,000 had previously been established by nts. What was the loss on factoring recognized by Mover company? R — b. 700,000 = ”’O'” - a z ~ T oéok c. 800,000 Ul ?;grbb ko d.’ 200,000 20k e. 500,000 - ey A9 ) 33. Chater company factored with recourse P2,000,000 of accounts receivable with a bank. The finance : C charge is 3%, and 5% was retained to cover sales discounts, sales returns and sales allowances. What amount of cash was received on the sale of accounts receivable? M x 3% = uole b. 1,900,000 My Th= kK ¢. 1,940,000 JeU d 1,840,000 (24 ‘e. 2,000,000 “RYo M | e 37 Rose Company sold accounts receivable without recourse with face amount of P6,000,000. The factor charged 15% commission on all accounts receivable factored and withheld 10% of the accounts i factored as protection against customer returns and other adjustments. The entity had previously established an allowance for doubtful accounts of P200,000 for the accounts factored. By year-end, the entity had collected the factor’s holdback there being no customer returns and other adjustments. What is the loss on factoring? (UM ¥ [T% = b. 700,000 €. 900,000 d. 200,000 e. 0
F, 4 obe Company assigned on a notification basis P4,000,000 of accounts receivable to finance entity as | asecurity for a loan of P3,500,000. The finance entity charged a 6% commission on the amount of the loan and interest on the note of 10%. During the first month, the finance entity collected P1,200,000 on the assigned accounts after deducting sales discounts of P150,000. The finance entity accepted sa[es returns worth P100,000 and wrote off assigned accounts totalling P50,000. What is the amount of cash received from the finance entity at the time of the transfer 2 b. 3,500,000 M ¥ = Dok — 3.64 = 52’:’:06” [ 2,940,00{] d. 3,200,000 - e. 3,260,000 Rate of gross profit on sales 20% 4 Accounts Receivable, December 31, 2021 P_80,000 Collections on accounts receivable in 2023 430,000 Cost of goods available for sale in 2023 460,000 Merchandise Inventory, December 31, 2023 100,000 Assuming all sales were on account, what was the €ompany's Accounts Receivable balance on December31, 2023? Ole Yubie ¥ = (Y b, P100,000 e Fije \A@ P120,000 Gl q‘m) d. P 90,000 fl £ 1% e. P50,000 i o e 45. Accounts Receivable for Titanium Company at December 31, .2022 showed a balance of P1,500,000. The Allowance for Uncollectible Accounts had a P45, 000 debit balance before the year-end adjustment. Sale during the year totaled P12,500,000. An aging analysis shows that 75, of the outstanding accounts receivable are estimated to be uncollectible. How much is the uncollectible accounts expense for 2023? . . P 45,000 b. P120,000 d . P75,000 . c. P30,000 ¢
\‘0 4% Violin company recorded uncollectible accounts expense of P20,000 during 2022, The allowance for K\ ,00 on December 31, 2021, During the year 2022 Violin . Ty b. P7,000 - (P0Ct0) <. P19,050 ~ peRy d4) P150s0 20600 é P45 550 Tlcoch B 249. on Desember 31, 2020, Potassium Corporation sold equipment to Sapphire Company for P100,000, L Potassium accepted a 10% note receivable for the entire sales price. This note is payable in two equal instaliments of P50,000 pius accrued interest on Dec, 1,2022, Potassium disco ember 31, 2021 and December 31,2022. on July 2 unted the note at a bank at a discount rate of 12%, Potassium Corporation’s Proceeds from the discounted note were b. Pagaop SV (v 00k = ey 0 ps1700 SCRX UG = '64)/‘;{) Ic 3 E d. Pag3sp e e. P50,350 'T o % OnJanuary 1 2021, Araneta Cor L : . v 8 S o S S 3 2 iling rate of interest for a note of this t value of 1 for three periods is 0.75 In Araneta’s 2022 statement of comprehensive income, how much should be reported as interest income? b. P140,000 c. P 33,000 d. P13,500 e. P 30,000 \ Prepared By: St Felecitas C. Tuazon