Loans and Receivables Sample Problems Part 2

1. Fatima Company obtained a one-year loan of P5,000,000 from a bank on April 1, 2005. The loan was discounted at
12%. The company signed a note and pledged its accounts receivable of P5,000,000 as collateral for the loan. In
relation to the loan, Fatima should report note payable on December 31, 2005 at
a. P4,850,000 c. P5,450,000
b. P4,400,000 d. P4,550,000

2. On December 1, 2005 Loida Company assigned on a nonnotification basis accounts receivable of 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. Loida signed a note
for the bank loan. On December 31, 2005, Loida collected assigned accounts of P3,000,000 less discount of P200,000.
Loida remitted the collections to the 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. In its December 31,
2005 balance sheet, Loida should report note payable as a current liability at
a. P1,745,000 c. P1,545,000
b. P1,700,000 d. P2,250,000

3. On September 30, 2005, Ren Company discounted at the bank a customer’s P5,000,000 6-month 10% note receivable
dated June 30, 2005. The bank discounted the note at 12%. The proceeds from this discounted note amounted to
a. P5,092,500 c. P4,842,000
b. P5,250,000 d. P5,170,000

4. On April 1, an entity assigned P700,000 of accounts receivable to a bank under a non-notification basis. The bank
advances 80% less a service charge of P5,000. The entity signed a promissory note that provides for interest at 1% per
month on the unpaid amount. On April 5, customer whose account was assigned returned goods purchased amounting to
P20,000. On April 10, a total of P300,000 of the accounts assigned were collected net of 2% discount. On April 30, the
entity remitted the total collections plus one month interest. How much is the equity in assigned accounts? 114,000

5. An entity factored accounts receivable of P500,000 with credit terms of 2/10, n/30 immediately after shipment of goods
to the customer. The factor charges a 5% commission based on the gross amount of the receivables factored. In addition,
the factor withholds 20% of the amount of the receivables factored to cover sales returns and allowances. How much is
the cash received from factoring and the loss from factoring? 365,000 – 0

6. A P1,000,000 180-day 12% note dated July 1 was received from a customer and discounted without recourse on August
30 at 15% discount rate. How much is the gain or loss on note discounting? 13,000 loss

7. International bank loaned P5,000,000 to Bankard Company on January 1, 2007. The terms of the loan require principal
payment of P1,000,000 each year for 5 years plus interest at 10%. The first principal payment is due on December 31,
2007. Bankard was able to make the required payments on 2007 and 2008 but began experiencing financial difficulty
during 2009 causing it to default in paying the required amount on December 31, 2009. On that date, International Bank
ascertained the collection the remaining principal as follows:
December 31, 2010 500,000
December 31, 2011 1,000,000
December 31, 2012 1,500,000

The collection of the interest is unlikely. How much is the impairment loss on December 31, 2009 and the interest
income on December 31, 2010?
892,100 – 214,869

8. Mummy Pekyew loaned P6,000,000 to Team Breadley evidenced by a 6 year 12% loan dated January 1, 2010. The loan
requires annual principal payment of 1,000,000 plus interest starting Dacember 31, 2010. Team Breadley was able to
make payments for 2010 and 2011 but began having financial problems in January 2012 due to a fire loss in its
warehouse. Mummy Pekyew estimated that it can collect the remaining principal as follows:

2012- 800,000
2013- 1,200,000
2014- 1,500,000
2015- 500,000
Mummy Pekyew waived the interest on the loan. How much is the impairment loss on this loan? How much is the discount
on Loans Receivable as of December 31, 2013?