1.

Receivables from officers, employees, or affiliated companies should be reported in the statement of financial
position as

2.Which of the following is NOT a valid basis for using trade discounts as adjustment to list price?

3.Under allowance method of recording cash discount, sales discounts are recorded

4.If a company employs the gross method of recording accounts receivable from customers, then sales
discounts taken should be reported as

5.If a company employs the net method of recording accounts receivable from customers, then sales discount
not taken should be reported as

6.If a note exchanged for property and interest rate is stated, at what amount should the note recorded at the
date of exchange?

7.At the beginning of 2012, Evans Company received a three-year zero-interest-bearing ₱600,000 note
receivable for merchandise sold. The market rate for equivalent notes was 8% at that time Evans reported
this note as a charge to notes receivable and a credit to sales revenue for ₱600,000. What effect did this
accounting for the note have on Evan’s profit for 2012, 2013, 2014, and its retained earnings at the end of
2014, respectively?

8.Which of the following events does not necessarily provide objective evidence that a receivable is impaired.
9.When a company , uses the allowance method of recognizing uncollectible accounts, the entry to write off a
customer’s account would have what effect on profit and amortized cost of accounts receivable?

10. Mary Quant Company prepares an account receivable aging schedule with a series of computations as
follows: 2% of the total peso balance of accounts from 1-60 days past due, plus 5% of the total peso
balance of accounts from 61-120 days past due and so on. How would you describe the total of the
amounts determined in this series of computations?

11. When the allowance method of recognizing uncollectible accounts expense is used, the entries at the time
of collection of an account previously written off would

12. Which form receivables financing is equivalent to an absolute sale of accounts receivable?

13. Which of the following is NOT a required disclosure for loans and receivables?

14. Which of the following statement is true?

15. The account credited when a note receivable discounted with recourse is

16. A company write off as uncollectible an account receivable from a bankrupt costumer. The company has an
adequate amount in its allowance for bad debts. This transaction will
17. A 60-day, 9% interest bearing note receivables must immediately discounted at a bank at 12%. The
proceeds received from the bank upon discounting would be the

18. A 120-day, 15% interest bearing note receivable is discounted to a bank at 18% after being held for 45 days.
The proceeds received from the bank upon discounting would be the

19. The following data are given for Mazda, Inc.

Cash Credit Total

Cost of sales ₱50,000 ₱450,000 ₱500,000

Cash received from customer 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 each are collectible. The balance of accounts receivable at the end of the period was

20. Expedition Company sold Merchandise on credit with a list price of ₱105,000 and a trade discount of 10%.
Terms were 2/10, n/30. Which of the following entries is correct, given the indicated method of accounting
for cash discounts.

21. Outlander Company sold on credit merchandise having a list price of ₱200,000 with the following terms:
trade discount of 10% and 5%; cash discount of 3% if the account is paid within 10 days from the invoice
date; full amount is due in 30 days. Which of the following entries is correct, to record the collection of the
account, given the indicated method of accounting for cash discounts?

22. Civic company had the following information relating to its accounts receivable:
23. You are given the following information relating to Sentra Trading, a general merchandising company:
3-1. Indicate how each of the following should be presented on the company’s statement of financial position
at December 31, 2014.

a. Claims from customer for merchandise sold

b. Claims from employees representing cash advances
c. Expense receipts for advance made for freight charges for the account of supplier
d. Claims from employees representing selling price of goods sold under normal credit terms
e. Customers’ accounts with credit balances resulting from sales returns subsequent to full
collection of account
f. Claims against consignees for goods shipped to the latter, goods are still unsold at the reporting
date
g. Claims against consignees for goods shipped to the latter and already sold on December 31.
h. Receivables arising from subscription to the company’s share capital
i. Receivables arising from sale of equipment
j. Deposit on purchase of undelivered merchandise
k. Creditors accounts with debit balances resulting from overpayment
l. Dishonored customers note
m. Income tax refund, approved by the BIR
n. Assigned accounts receivables
o. Customers’ accounts on which postdated checks are held.
p. Customers’ accounts ascertained to be uncollectible

3-2 The following transactions were completed by Ginoo Company in December 2014.

Dec. 9 Sold merchandise to First Lady Department store under credit terms of 2/10, n/30 the
price is ₱120,000, less 10%, less 5%

10 Sold merchandise to Men’s World, ₱50,000, 2/10 n/30

19 Collected the account of the First Lady Department Store in full.

Dec. 26 Sold merchandise to Teens’ Kingdom, ₱40,000, 2/10, n/30.

 The company adopts, the calendar year as its reporting period. The accounts of Men’s World Teens’
Kingdom are considered to be collectible at December 31. Teens’ Kingdom paid its account in full on
January 5, 2015, while Men’s World paid its account in full on January 5, 2015, while Men’s World paid
its account in full on January 9, 2015.

REQUIRED:

Journalize the foregoing transactions using the three methods of accounting for sales discounts,
Prepare also any appropriate adjusting entry at December 31.

3-3 The Colleco Supermarket Company completes the following transactions relating to its credit card sales
during 2014:

 Total sales charged by customers are as follows

Citibank ₱2,500,000

BDO 1,800,000

Metrobank 1,500,000

Credit card receipts charged to BDO are credited directly to Colleco, net of 2% service charge.

 Deposits made by banks to the account of Colleco for credit card sales, net of 2% service charge:

Citibank ₱2,156,000

Metrobank 1,078,000

REQUIRED:

Journalize the foregoing transactions in the books of Colleco

3-4 The Colayco Company completed the following transactions during the year 2014.

July 14 Wrote off the account of Moret Company for ₱10,000 that arose from a sale in September
2013.

31 Received a ₱12,000, 90-day 10% note from P. Noval Company for merchandise sold.
 Aug. 15 Received ₱20,000 cash plus ₱15,000 note from Dapitan for merchandise sold. The note is
dated August 15 and bears interest at 12% and matures in 120 days.

Nov. 1 Completed a ₱20,000 credit card sale with a 4% fee. Cash is received immediately from
the credit card company.

Nov. 4 P. Noval Company refuses to pay the note that was due to Colayco.

Nov. 5 Completed a ₱9,000 credit card sale with a 5% fee. The amount due from the credit card
company was received on November 9.

15 Received the full amount of ₱10,000 from Moret Company that was previously written
off on July 14.

Dec 13 Received payment of principal plus interest from Dapitan for the August 15 note.

REQUIRED:

Prepared journal entries to record the transactions on Calayco Company’s Books.

3-5. On January 1, 2013, Format Company sold a tract of land that was acquired several years ago for
₱2,800,000. Format received a non interest bearing note for ₱6,000,000 due on December 31, 2015 in
exchanged for the land. There is so readily available market value for the land, but the current market rate
of the interest for comparable notes is 15%. Present value of ₱1 for three periods is 15% is 0.6575. Present
value of an annuity of ₱1 for three periods at 15% is 2.2832.

REQUIRED

(a) What are the amounts of interest revenue recognizes in Formats profit and loss for the years 2013 and
2014
(b) What is the caring value of the note at December 31, 3013 and at December 31 4014?
(c) How would the note receivable be classified on the statement of financial position at December 31,
2013 and at December 31 2014?

3-6. On January 1, 2013, Formatted Company sold a track of land that was acquired several years ago for
₱2,800,000. Formatted received a non interest bearing note for ₱6,000,000 due on December 31, 2015 in
exchanged for the land. There is so readily available market value for the land, but the current market rate
of the interest for comparable notes is 15%. Present value of ₱1 for three periods is 15% is 0.6575. Present
value of an annuity of ₱1 for three periods at 15% is 2.2832.

REQUIRED:

(a) What are the amounts of interest revenue recognizes in Formats profit and loss for the years 2013
and 2014
 (b) What is the caring value of the note at December 31, 3013?

(c) What amounts of the note should be classified as current assets and non-current assets at December
330, 2014.

3-7. HRV Company has a 12% note receivable dated October 1, 2013 in the original amount of ₱3,000,000.
Payments of ₱1,000,000 in principal plus accrued interest are due annually on September 30, 2014, 2015
and 2016.

REQUIRED:

(a) Compute the amount that will be collected on September 30, 2014, 2015 and 2016.
(b) Compute the interest revenue for the year ended December 31, 2014.
(c) How much of the note receivables and interest receivables shall be classifies as current assets and non-
current assets at December 31, 2014 statement of Financial Position?

3-8 On January 1, 2013, Pinky Pop Company sold a piece of land with a carrying amount of ₱6,000,000 in
exchanged for a 5% promissory note with a face amount of ₱7,500,000. The note is payable in annual
installments of ₱2,500,000 plus accrued interest on the outstanding balance. The first installment is due on
December 31, 2013. There is no established cash price for the land and the note has no ready market. The
prevailing interest rate for a note for this type is 10%. (Use the present value factors from the appropriate
Table in the Appendix)

REQUIRED: (Round off figures to nearest peso)

(a) Prepare an amortization table (follow the format presented in this chapter)
(b) Prepare all journal entries to record the transactions from January 1, 2013 to December 31, 2015.

3-9 On January 1, 2013, Pinky Pip Company sold a piece of land with a carrying amount of ₱6,000,000 in
exchange for a promissory note a face amount of ₱7,500,000. The note is payable in annual installments of
₱2,500,000 plus accrued interest on the outstanding balance. The first installment is due on December 31,
2013. There is no established cash price for the land and the note has no ready market. The prevailing
interest rate for a note for this type is 10%. (Use the present value factors from the appropriate Table in the
Appendix)

REQUIRED: (Round off figures to nearest peso)

(a) Prepare an amortization table (follow the format presented in this chapter)
(b) Prepare all journal entries to record the transactions from January 1, 2013 to December 31, 2015.
3-10. The statement of financial position of Toyota Products, Inc. shows the accounts receivable balance at
December 31, 2013 as follows:

Accounts Receivable – trade ₱450,000

Allowance for Uncollectible Accounts 9,000

₱441,000

During 2014, transactions relating to the accounts were as follows:

a. Sales on account, ₱4,800,000.

b. Cash received from collection of current receivable totaled ₱3,920,000 after discounts of ₱80,000
were allowed for prompt payment.
c. Credit memo issued to customer for sales returns ₱60,000.
d. Customers’ accounts of ₱20,000 were ascertained worthless and written off.
e. Recovered ₱5,000 of accounts written off prior to 2014.
f. Received a 90-day, 12% note for ₱25,000 from a customer on an overdue account.
g. Accounts receivable of ₱700,000 have been pledge to a local bank on a loan of ₱400,000. Collections
of ₱150,000 were made on these receivables (not include in the collection previously given) and
applied as a partial payment of a loan.
h. Based on assessment of the impairment of a receivables, it is estimated that allowance for
uncollectible accounts should be ₱59,000 at December 31.
i. Recorded the accrued interest on the note in (f). The note was dated December 1, 2014.

REQUIRED

Prepare a journal entries to record the foregoing transactions. After preparing journal entries, determined
the amortized cost of the accounts receivables at December 31, 2014.

No. of Days Outstanding Amount Probability of collection

0-30 days ₱500,000 98%

31-60 days 200,000 90%

Over 60 days 100,000 80%

The following information is available for the current year.

Net credit sales for the year ₱4,000,000

Allowance for Uncollectible accounts, Jan.1 5,000 (cr.)

2014
Allowance for uncollectible accounts, December 31, 2014 (Before adjustment) 2,000 (dr.)

REQUIRED:

Determined the Uncollectible Account Expense and Allowance for Uncollectible Accounts reported in Word’s
financial statement 2014.

3-12. After examination of the records of Edit Company, you determined the following year end amounts:

2014 2015

Net credit sales ₱1,200,000 ₱1,050,000

Account Receivable 305,000 260,000

Allowance for Uncollectible Accounts 12,000 6,000

Uncollectible accounts written off in previous

Year and then recovered this year 3,000

Your examination of the records of the company indicates that uncollectible accounts expense recorded
during 2012 was ₱48,000.

REQUIRED:

What is the amount of the accounts receivable actually written off during 2014?

3-13 The balances of selected accounts taken from December 31, 2013 statement of financial position of Rav,
Inc. are as follows:

Account Receivable ₱337,000

Allowance for Uncollectible Accounts 12,000

The following transactions (in summary) affecting accounts receivable occurred during the year ended
December 31, 2013 statement of financial position of Rav, Inc. are as follows:

Sales (all on account, terms: 2/10, 1/15, n/60) ₱1,500,000

Cash received from customers 1,600,000

From customers paying within the 10-day

 within the 15-day

discount period 495,000

From recovery accounts written off 3,000

From customers paying beyond the discount period ?

Accounts receivable written off ass worthless 11,000

Credit memoranda for sales returns 6,000

Based on assessment of the collectability of the accounts, impairment loss recognize on accounts receivable
is ₱15,000.

REQUIRED:

Computed Accounts Receivable and Allowance for Uncollectible Accounts at December 31, 2014.

3-14. Revo Company has an allowance for uncollectible accounts balance of ₱34,000 at January 1, 2014.
During 2014, accounts totaling ₱47,000 were written off in prior years amounting ₱7,000 were recovered
during the year. At December 31, 2014. An aging of its accounting receivable showed:

Amount % Uncollectible

Not yet due ₱340,000 0%

1-30 days past due 240,000 5%

31-60 days past due 20,000 25%

61-90 days past due 30,000 50%

Over 90 days past due 24,000 90%

Additional accounts to be written off 6,000

REQUIRED: Show computations for the following

(a) Uncollectible Accounts Expense for the year 2014

(b) Amortized cost of accounts receivable at December 31, 2014

3-15. The Financial statement of adventure Company reported the following selected accounts.

Accounts Receivable, January 1, 2014 ₱1,200,000

 Allowance for Uncollectible Accounts Jan 1, 2014 60,000

Sales during 2014 10,000,000

Cash collected from customers 8,720,000

The cash collected from customers included a ₱20,000 recovery from a customer whose account was
written off in prior year. On November 15, a customer settled his overdue account by issuing a 15%, 4 month
note for ₱400,000. During 2014, accounts of ₱100,00 were written off as worthless.

Analysis of the accounts receivable at December 31, 2014 revealed that ₱600,000 were considered past
due. Management’s estimate of probable loss on past due accounts is 20% and on current accounts at 5%.

REQUIRED: Determined the Following

(a) Adjusted balance of allowance for uncollectible accounts at December 31, 2014
(b) Uncollectible Accounts Expense for year 2014
(c) Amortized cost of account receivable at December 31, 2014.

1-16. Maynilad Bank has a 10,000,000 loan to ABC Realty, which was invested by the leatter in real estate
business, ABC Realty is experiencing declining sales and is likely to default in its obligation to Maynilad.
Prevailing market rate of interest for similar obligation at the time of restricting is 8%. Accrued interest
receivable on the loan at December 31, 2014 is ₱1,000,000, based on stated interest rate of 10%.

For each of the following alternative restricting arrangements, determine the amount of impairment
loss to be recognized by Maynilad, and give the entry in the books of the company to record the
impairment. (Round off present value factors to four decimal places)

Alternative 1

 Reduction of principal to ₱9,000,000

 Condonation of accrued interest
 Extension of maturity date to December 31, 2016
 Reduction of interest rate to 8%, payable in annual on December 31.

Alternative 2

 Condonation of Accrued interest

  Principal amount of ₱2,000,000 plus interest on the unpaid principal reduced to 8%, payable in
annual installments to begin December 31, 2015.

Alternative 3

 Payment of the accrued interest on the date of restructuring (December 31, 2014)
 Extension of maturity date of the loan to December 31, 2016. With interest during the extended term
at 7% payable on December 31, 2015 and 2016.

Alternative 4

 Extension of maturity date to December 31, 2016

 Interest at 10% on the carrying value of the loan (11,000,000) payable December 31, 2015 and
December 31, 2016

The present condition of ABC Realty indicates that it has the ability to meet the modified terms as indicated.

3-17. On April 1, 2014, the Kate Company issued ₱750,000, 12% note due on May 31, 2014 to National Banl
Company for money borrowed. Kate Company pledged ₱900,000 of its account receivable as collateral for
this loan.

REQUIRED:

(a) Record any necessary entry on April 1, 2014 in the books of Kate Company as a result of the
foregoing.
(b) Assumes that Kate’s reporting period ends April 30. Show how the effects of the foregoing
transactions will be shown in Kate’s statement of financial position. Kate’s total accounts receivable
at April 30, 2014 is ₱3,000,000

3-18 On Sept. 1, 2014, Lexus Company assigns specific receivables totaling ₱800,000 to Pacific Bank as a
Collateral on a ₱650,000, 12% note. Lexus will continue to collect the assigned account. Pacific also assesses a
2% service charge based on the total accounts receivable assigned. Lexus Company is to make monthly
payments to Pacific with cash collected on assigned accounts.

During The month of September Lexus collected ₱300,000 of account assigned. This amount, plus one-month
interest on the loan balance was remitted to the finance company on September 30.
During October, Lexus wrote off ₱10,000 and collected ₱400,000 of assigned accounts. The balance of the
loan plus interest thereon was remitted to Pacific Bank on October 31. The Balance of assigned accounts
receivable was reverted to Lexus.

REQUIRED:

Prepare a journal entries in the Books of Lexus Company record the foregoing transactions

3-19. Accord Company had the following transaction during 2014.

July 1 Accord assigned ₱5,000,000 of accounts receivable to a bank in consideration of loan.

The bank advanced 80% of the assigned accounts Receivable less service charge of 5%
on the amount of the loan. Customers were not notified of the assignment: thus,
Accord continues to make collections.

July 21 Accord issued a credit memo to a customer, whose account is assigned with the bank,
for defective merchandise returned amounting to ₱200,000.

31 Assigned accounts of ₱2,500,000 were collected, less 2% cash discount.

August 1 Remitted ₱2,500,000 to the bank plus interest for 1month at a rate of 12% per year.

August 15 Assigned accounts amounting to ₱50,000 were to be worthless and were written off.

31 Collection of ₱2,000,000 were made from the assigned accounts.

Sept. 1 Paid the balances due to the bank, plus 12% interest. The balance in the assigned
accounts, if any, is reverted to unassigned accounts after final settlement with the bank.

REQUIRED:

Prepare journal entries for the foregoing transactions.

3-20 Fortune Company completed the following selected transactions during 2014:
Oct.1 assigned accounts of ₱2,000,000 to Ayala Bank under a notification basis. Ayala Bank
made of 75% and deducted a 6% finance charge based on the amount advanced.

Oct.31 Received notice from Ayala Bank that ₱1,000,000 assigned accounts had been collected, and that
Ayala charged Fortune 12% interest. The collection is applied first to the interest, and the balance is
applied to the principal payment.

Nov.30 Received notice from Ayala Bank that ₱800,000 had been collected. Ayala remitted to Fortune the
amount due to the latter, after deducting 12% interest on the loan balance.

REQUIRED:

Prepare journal entries in the Books of Fortune Company to record foregoing transactions.

3-21 During its second year operations, Highlander Company thought of expanding its business. In order to
generate additional cash necessary for this expansion, on September 1, 2014. The company factored
₱800,000 of accounts receivable to Ace Finance Company. Factoring fee was 10% of the receivables
purchased. The finance company withheld 5% of the purchase price as protection against sales
returns and allowances.

On November 1, 2014, accounts receivable amounting to ₱1,000,000 were assigned to City Bank as
collateral on ₱600,000, 12% annual interest rate loan. A 3% finance charge was deducted in advance.

Additional information on December 31, 2014, before year-end adjustments:

Allowance for Uncollectible accounts - ₱13,400 (credit)

Estimated Uncollectible Accounts- 2% of accounts receivable

Account Receivable, excluding factored and assigned accounts ₱250,000. None of the assigned
amccounts were collected,

Required:

(a) Entry to record factoring and general assignment accounts receivable.

(b) Entry to adjust allowance for uncollectible accounts December 31, 2014.

3-22 During the second year of operations, Hiku Company thought of expanding its business.
In order to generate additional cash necessary for his expansion, on April 1, 2014, the
 company factored ₱1,200,000 of accounts receivable to challenge finance factoring fee was
10% of the receivables purchased. The finance company withheld 6% of the purchase price
as protection against sales returns and allowance.

On May 1 2014 accounts receivable amounting ₱500,000 were assigned to First Bank as a
collateral. The bank advances 80% of the assigned accounts less finance charge of 5% based
on the amount advance. During the month of Ma , Hiku collected ₱350,000 which was
remitted to the bank on June 1. This amount was applied first to payment of interest at the
rate 1% per month based on outstanding balance and the remainder was applied to the
principal.

On June 1, a note receivable with a face value of ₱50,000 face value note bears 9% interest
dated April 30 and its due on August 28.

REQUIRED: Determined the following ( Use a 360 –day year)

(a) Amount of cash received from the factoring of accounts receivables

(b) Equity on assigned accounts as of June 1 after remittance to the bank.
(c) Cash proceeds from the discounting of note on June1

3-23 Edsamail Company received from a customer a one-year ₱500,000 note bearing annual
interest of 8%. Five months prior to maturity, Edsamail discounted the note of Asian bank at
10%.

REQUIRED:

(a) What were the proceeds from the note discounting?

(b) Give the entry for discounting, assuming the note discounted without a recourse.
(c) Give the entry for the discounting, assuming the note discounted with a recourse.

3-24 On May 16, 2014, EBT discounted with the bank the following notes at 10%

a. 30-day, ₱90,000 non-interest bearing note dated May 6 2014

b. 90-day, ₱75,000, 9% note dated April 6, 2014.
c. 120-day, ₱60,000, 12% note dated March 2,2014.

REQUIRED:
 Determined the cash proceeds from discounting each note and record the discounting
transaction assuming the discounting is made with recourse. Use a 365-day year. Round off
figures to the nearest peso.

3-25 On February 1, 2014, Crosswind Corporation acquired a 10% , 9-month note receivable from a customer
in settlement of an overdue accounts received of ₱360,0000. The principal and interest are due in maturity.
On April 1, 2014, crosswind discounted the note at Philippine Bank at 12%. During November, Philippine bank
notified crosswind that the note was dishonored by the maker and the bank charged Crosswind’s account for
the maturity value of the note plus a protest fee of ₱20,000

REQUIRED:

Prepare all entries in the books of Crosswind relating to the above.

3-26 Explorer company finances some of its current operations by factoring its account receivable to
a fiancé company. On July 1, 2014, the company factored ₱2,000,000 of its accounts receivable to Atlast
Finance Company. Purchased price was 85% of the receivables factored. Atlast withheld 5% of the purchase
price as protection against sales returns and allowances

Sales returns recorded by Explorer on the factored accounts receivable totaled ₱30,000; the balance of the
factors holdback was settled by the finance company on August 31, 2014

REQUIRED:

(a) What was the net cash received by Explorer from this factored accounts?
(b) Give the entries in the Books of Explorer to record the foregoing in the moths of july and aug. 2014.

3-27. The Nature Company manufactures and sells beauty products to retailers. During 2014, the company
completed the following transactions related to receivabes:
 (1) Sold goods, ₱3,000,000 on account, all under the terms: 2/15, n/60. The company uses the gross
method to record accounts receivable.
(2) Total cash collected from customers on account was ₱2, 250,000. Customers who paid ₱882,000
paid their accounts within the discount period.
(3) Notes received in settlement of account were ₱ 250,000.
(4) Collected ₱200,000 of notes receivable plus interest of ₱16,000
(5) Notes receivable discounted with recourse ₱40,000. Proceeds from the discounting were ₱41,400.
The total maturity value of the notes is ₱46,000 . all of these notes matured without notice of
protest.
(6) Account receivable assigned were ₱30,000 on a loan for ₱240,000. Service fees of ₱18,000 were
charge by the finance company on the assignment.
(7) Notes receivable of ₱15,000 were overdue as of December 31, on which ₱900 interest has accrued.
(8) Accounts of ₱12,000 were written off during 2014.
(9) As of December 31, ₱180,000 of the assigned accounts had already been collected [include in (b)],
this amount plus appropriate interest of ₱3,000 had been remitted to the finance company.
(10)As December 31, an assessment of collectability of the receivables indicated that the allowance for
uncollectibles must be adjusted to a balance of ₱30,000
(11)Of the remaining notes not yet due, ₱3,200 interest had accrued at December 31.

The following were the balances as of December 31,2013:

Notes Receivable ₱100,000

Interest Receivable 2,800

Account Receivable 600,000

Allowance for Uncollectible Accounts 12,000

REQUIRED:
(a) Prepare entries relating to the foregoing, including year-end adjustment and any reversing
entries at January1
(b) Determined the single amount that will be shown in the line item “Trade and Other Receivable’s”
under the current assets section of the statement of financial position.