Since 1977

FAR OCAMPO/CABARLES/SOLIMAN/OCAMPO
QUIZ NO. 3 SET A OCTOBER 2019

1. Which statement is incorrect regarding PFRS 15? Claim against shipper for goods lost in
a. The core principle is that an entity recognizes transit last November 2019 3,000
revenue to depict the transfer of promised goods Selling price of sold goods sent by Halo
or services to customers in an amount that reflects
on consignment at 30% of cost (not
the consideration to which the entity expects to be
entitled in exchange for those goods or services. included in Halo's ending inventory) 26,000
b. Transaction price is the amount of consideration to Security deposit on the lease of a
which an entity expects to be entitled in exchange warehouse 30,000
for transferring promised goods or services to a Total P150,000
customer, including amounts collected on behalf of
third parties. How much should be reported as trade and other
c. For the purpose of determining the transaction receivables in Mann's December 31, 2019 statement of
price, an entity shall assume that the goods or financial position?
services will be transferred to the customer as a. P94,000 c. P120,000
promised in accordance with the existing contract. b. P68,000 d. P150,000
d. Where a contract has multiple performance
obligations, an entity will allocate the transaction 5. A company, which has an adequate amount in its

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price to the performance obligations in the contract Allowance for Doubtful Accounts, writes off as

er as
by reference to their relative standalone selling uncollectible an accounts receivable from a bankrupt

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prices. customer. This action will

2. Which statement is incorrect?

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b. Reduce the amount of equity.

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a. At initial recognition, an entity shall measure trade c. Reduce total current assets.
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receivables at their transaction price (as defined in d. Have no effect on total current assets.
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PFRS 15) only if the trade receivables do not

contain a significant financing component in
accordance with PFRS 15.
b. In accordance with PFRS 15, a receivable is an
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6. When examining the accounts of Darna Company, you
ascertain that balances relating to both receivables and
payables are included in a single controlling account
called receivables control that has a debit balance of

entity’s right to consideration that is unconditional

(only the passage of time is required before P7,275,000. An analysis of the composition of this
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payment of that consideration is due). account revealed the following:

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c. The ideal measure of short-term receivables in the Debit Credit

statement of financial position is the discounted
Accounts payable for
value of the cash to be received in the future,
merchandise P6,750,000
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failure to follow this practice usually does not make

the statement of financial position misleading Account receivable –
ed d

because the amount of the discount is not customers P11,700,000

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material. Accounts receivable –

d. In accordance with PFRS 15, variable officers 750,000
considerations are excluded in the transaction price Cash received in advance
only to the extent that it is highly probable that a
from customers for
is

significant reversal in the amount of cumulative

revenue recognized will occur when the uncertainty goods not yet shipped 150,000
Credit balances in
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associated with the variable consideration is

subsequently resolved. customers’ accounts 300,000
e. Debit balances –
3. The Pacifier Company uses the net price method of creditors 450,000
accounting for cash discounts. In one of its Expected bad debts 225,000
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transactions on December 15, Pacifier sold

Postdated checks from
merchandise with a list price of P500,000 to a client
who was given a trade discount of 20% and 15%. customers 600,000
Credit terms were 2/10, n/30. The goods were Subscriptions receivable 1,200,000
shipped FOB seller, freight collect. On December 20, due in 2020
the client returned damaged goods originally billed at
P60,000. Total freight charges paid by the buyer After further analysis of the aged accounts receivable,
amounted to P7,500. What is the net realizable value you determined that the allowance for doubtful
of this receivable on December 31? accounts should be P300,000. What is the correct
a. P272,500 c. P280,000 total of current net receivables?
b. P274,400 d. P333,200 a. P13,425,000 c. P14,400,000
b. P13,200,000 d. P13,275,000
4. On the December 31, 2019 statement of financial
position of Halo Company, the receivables consisted of 7. Cabugao Company began operations on January 1,
the following: 2018. On December 31, 2018, Cabugao provided for
uncollectible accounts based on 5% of annual credit
Trade accounts receivable P 93,000 sales. On January 1, 2019, Cabugao changed its
Allowance for uncollectible accounts ( 2,000) method of determining its allowance for uncollectible

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EXCEL PROFESSIONAL SERVICES, INC.

accounts to the percentage of accounts receivable. a. Bad debt expense is an estimate that is based on
The rate of uncollectible accounts was determined to historical and prospective information.
be 15% of the ending accounts receivable balance. In b. Bad debt expense is based on the actual amounts
addition, Cabugao wrote off all accounts receivable determined to be uncollectible.
that were over 1 year old. The following additional c. Bad debt expense is an estimate that is based only
information relates to the years ended December 31, on an analysis of the receivables aging.
2018 and 2019. d. Bad debt expense is management's determination
2019 2018 of which accounts will be sent to the attorney for
Credit sales P8,000,000 P6,000,000 collection.
Collections (excluding
11. On December 30, 2018, Chang Co. sold a machine to
collections on
Door Co. in exchange for a noninterest-bearing note
recovery) 6,950,000 4,500,000 requiring ten annual payments of P10,000. Door made
Accounts written off 70,000 None the first payment on December 30, 2019. The market
Recovery in accounts interest rate for similar notes at date of issuance was
previously written off 20,000 None 8%. Information on present value factors:
Present Value Present Value of Ordinary
How much is the provision for uncollectible accounts
for the year ended December 31, 2019? Period of 1 at 8% Annuity of 1 at 8%
a. P125,000 c. P400,000 8 0.54 5.76
b. P122,000 d. P 72,000 9 0.50 6.25
10 0.46 6.71
8. CALACHUCHI CORP.’s accounts receivable subsidiary
ledger shows the following information: In its December 31, 2019 statement of financial

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position, what amount should Chang report as note

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Customer Dec. 31, 2019 Date Amount receivable?

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Trinidad P35,180 12/06/19 P14,000 a. P45,000 c. P62,500

De Leon 20,920
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11/29/19
09/27/19
21,180
12,000
b. P46,000 d. P67,100

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08/20/19 8,920 Use the following information for the next two questions.
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Cabarles 30,600 12/08/19 20,000 On December 31, 2018, Comforter Company sold
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10/25/19 10,600 equipment with a carrying amount of P400,000 to Cold

Tabag 45,140 11/17/19 23,140 Company and accepted in exchange a noninterest-bearing
10/09/19 22,000 note with a face value of P600,000, a due date of
Ong 31,600 12/12/19 19,200 December 31, 2021. The fair value of the equipment is
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12/02/19 12,400 determined to be P450,780.

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Uro 17,400 09/12/19 17,400

12. The carrying amount of the note receivable as of
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December 31, 2019 is

The estimated bad debts rates below are based on
a. P600,000 c. P495,840
Calachuchi Corp.’s receivable collection experience.
b. P500,530 d. P486,960
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Age of accounts Rate

13. The interest income to be recognized in 2019 is
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0 - 30 days 1%
a. P45,078 c. P48,259
31 - 60 days 1.5%
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b. P49,750 d. Nil
61 - 90 days 3%
91 - 120 days 10%
14. If, at the reporting date, the credit risk on a financial
Over 120 days 50%
instrument has increased significantly since initial
recognition
is

The Allowance for bad debts account had a debit

a. An entity shall not recognize a loss allowance for
balance of P5,500 on December 31, 2019, before
that financial instrument.
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adjustment.
b. Interest revenue is calculated based on the
amortized cost of the financial asset.
What is the net realizable value of accounts receivable
c. An entity shall measure the loss allowance for that
at December 31, 2019?
financial instrument at an amount equal to full
a. P165,641 c. P196,039
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lifetime expected credit losses.

b. P171,141 d. P186,340
d. An entity shall measure the loss allowance for that
financial instrument at an amount equal to 12-
9. Receivables from officers, directors and employees for
month expected credit losses.
goods sold or services rendered in the ordinary course
of business
Dalagang Filipina provided the following information
a. Are considered current if proper control is
regarding its Notes Receivable at December 31, 2019:
exercised in granting credit and the accounts are
currently collectible Note Gross CA Lifetime 12- Credit risk
b. Are not included in trade accounts receivable ECL month assessment
c. Are included in current assets even if the ECL
receivables are actually loans and advances and A P3,000,000 P300,000 P50,000 Credit-
the collection is unlikely within a year
impaired
d. Are always classified as noncurrent
B 2,000,000 400,000 40,000 Low credit
10. Which of the following concepts relates to using the risk
allowance method in accounting for accounts C 1,000,000 500,000 60,000 31 days
receivable? past due

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 EXCEL PROFESSIONAL SERVICES, INC.

15. The loss allowance that Dalagang Filipina should 21. On December 31, 2019, Merciful Bank entered into a
recognize at December 31, 2019 is debt restructuring agreement with Miserable Corp.,
a. P1,200,000 c. P900,000 which was experiencing financial difficulties. A note for
b. P 950,000 d. P840,000 P1,000,000 and one year's accrued interest was due
on this date from Miserable. The note receivable from
16. Assuming that the effective interest rate on all notes is Miserable was restructured as follows:
10%, the interest income to be recognized in 2020  reduced the principal obligation to P700,000.
profit or loss is  forgave the P120,000 of accrued interest for 2019.
a. P600,000 c. P570,000  extended the maturity date to December 31, 2022.
b. P550,000 d. P480,000  reduced the interest rate to 8%. Interest is
payable annually on December 31, beginning
17. Statement 1: An entity shall derecognize a financial
2020.
asset when, and only when the contractual rights to
the cash flows from the financial asset expire and the How much loss should be recognized in 2019 profit or
entity transfers the financial asset and the transfer loss?
qualifies for derecognition. a. P487,239 c. P420,000
Statement 2: An entity transfers a financial asset if, b. P367,239 d. P300,000
and only if, it transfers the contractual rights to receive
the cash flows of the financial asset and retains the 22. Which statement is incorrect?
contractual rights to receive the cash flows of the a. Companies account for transfers between
financial asset, but assumes a contractual obligation to investment classifications retroactively, at the end
pay the cash flows to one or more recipients in an of the accounting period after the change in the
arrangement that meets the “pass-through” business model.
conditions. b. The Unrealized Holding Gain or Loss–Income

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Statement 3:Transfer of risks and rewards are account is reported in the other income and

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evaluated by determining the transferee’s ability to sell expense section of the income statement.

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the asset. c. Over the life of a debt investment, interest
a. True; True; True
b. False; False; True
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c. True; True; False
d. False; False; False
revenue and the gain on sale are the same using
either amortized cost or fair value measurement.

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d. The fair value option is generally available only at
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18. Which statement is correct regarding transfers that do the time a company first purchases the financial
not qualify for derecognition because the entity has asset or incurs a financial liability.
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retained substantially all the risks and rewards of

ownership of the transferred asset? 23. Which statement is correct?
a. The entity shall not continue to recognize the a. PFRS 9 requires that investments meeting the
transferred asset in its entirety. business model (held-for-collection) and
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b. The entity shall recognize a gain or loss. contractual cash flow tests be valued at amortized
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c. In subsequent periods, the entity shall recognize cost.

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any income on the transferred asset and any b. Amortized cost is the initial recognition amount of
expense incurred on the financial liability the investment minus cumulative amortization.
d. The asset and the associated liability shall be c. Companies measure debt investments at fair value
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offset. if the objective of the company’s business model is

to hold the financial asset to collect the contractual
ed d

19. On December 1, Caoayan Company assigned on a cash flows.

nonnotification basis accounts receivable of
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d. PFRS 9 requires that companies classify financial

P5,000,000 to a bank in consideration for a loan of
90% of the receivables less a 5% service fee on the
accounts assigned. Caoayan signed a note for the
bank loan. On December 31, Caoayan collected
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assets into one measurement category – fair
value.
Use the following information for the next two questions.

assigned accounts of P3,000,000 less discount of

P200,000. Caoayan remitted the collections to the On January 1, 2019, Choson Corporation purchased
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bank in partial payment for the loan. The bank applied
first the collection to the interest and the balance to
the principal. The agreed interest is 1% per month on
the loan balance.
How much is Caoayan’s equity in the assigned
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P4,000,000 10% bonds for P3,711,520. These bonds are
held in a business model whose objective is achieved by
collecting contractual cash flows of financial assets. The
bonds were purchased to yield 12%. Interest is payable
annually every December 31. The bonds mature on

accounts receivable as of December 31? December 31, 2023. On December 31, 2019 the bonds
a. P300,000 c. P410,000 were selling at 99. On December 31, 2020, Choson sold
b. P255,000 d. P455,000 P2,000,000 face value bonds at 101, which is the fair value
of the bonds on that date, plus accrued interest.
20. The Hinoba-an Department Store wishes to discount a
note receivable arising from the sale of merchandise in 24. The unrealized gain to be recognized as a separate
order to meet some maturing obligations. The note component of equity on December 31, 2019 is
has a face amount of P600,000. The note bears a. P203,098 c. P152,270
interest of 10% and is due in ten months. The bank b. P248,480 d. P 0
rate in discounting notes is 12%. Assuming that the
note was discounted five months prior to maturity. If 25. The gain on sale of the bonds on December 31, 2020
the note discounting is treated as a sale without is
recourse, the loss on discounting is a. P217,684 c. P116,040
a. P8,000 c. P2,500 b. P116,135 d. P141,549
b. P2,000 d. P7,500

 - end - 

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