RECEIVABLE FINANCING

Use the following information for the next three (3) questions:

On December 1, 20x20, an entity assigned on a non-notification basis accounts receivable of P5,000,000 to a bank in consideration
for a loan of 80% of the accounts less a 5% service fee on the accounts assigned. The entity signed a note for the bank loan.

On December 31, 20x20, the entity collected assigned accounts of P2,000,000 less discount of P200,000. The entity 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.

The entity accepted sales returns of P100,000 on the assigned accounts and wrote off assigned accounts of P300,000.

1. What is the balance of accounts receivable assigned on December 31, 20x20?

A. P3,000,000 B. P2,600,000 C. P2,400,000 D. P2,900,000

2. What is the carrying amount of the note payable on December 31, 20x20?
A. P2,240,000 B. P2,000,000 C. P4,000,000 D. P2,200,000

3. What is the equity of the assignor in assigned accounts on December 31, 20x20?
A. P2,600,000 B. P2,240,000 C. P360,000 D. P0

Use the following information for the next three (3) questions:

An entity factored P5,000,000 of accounts receivable. Control was surrendered by the entity. The transaction met the criteria to be
accounted for as sale but subject to recourse for nonpayment. The fair value of the recourse obligation is P250,000. The finance
company assessed a fee of 6% and retained a holdback equal to 10% of the accounts receivable. In addition, the finance company
charged 12% interest computed on a weighted average time to maturity of the accounts receivable for 30 days.

4. What amount was initially received from the factoring of accounts receivable?
A. P4,500,000 B. P4,200,000 C. P4,700,685 D. P4,150,685

5. What total amount should be recognized initially as loss on factoring?

A. P349,315 B. P849,315 C. P755,000 D. P599,315

6. What amount should be reported as loss on factoring assuming the accounts are fully collected by the factor?
A. P349,315 B. P300,000 C. P550,000 D. P299,315

Use the following information for the next two (2) questions:

An entity accepted from a customer in settlement of an account a P4,000,000. 90-day 12% note dated August 31, 20x20. On
September 30, 20x20, the entity discounted the note at 15% with recourse at the bank. The note was paid in fully by the maker on
maturity. The discounting is accounted for as a conditional sale with recognition of a contingent liability.

7. What amount was received from the note receivable discounting?

A. P4,017,000 B. P4,120,000 C. P4,103,000 D. P3,965,500

8. What is the loss on note receivable discounting?

A. P40,000 B. P23,000 C. P17,000 D. P20,000

Use the following information for the next two (2) questions:

On April 1, 20x20, an entity discounted with recourse a 9-month, 10% note dated January 1, 20x20 with face of P6,000,000. The
bank discount rate is 12%. The discounting transaction is accounted for as a conditional sale with recognition of contingent liability.

On October 1, 20x20, the maker dishonored the note receivable. The entity paid the bank the maturity value of the note plus protest
fee of P50,000.

On December 31, 20x20, the entity collected the dishonored note in full plus 12% annual interest on the total amount due.

9. What amount was received from the note receivable discounting?

A. P6,063,000 B. P6,450,000 C. P6,150,000 D. P5,963,000

10. What amount should be recognized as loss on note receivable discounting?

A. P450,000 B. P387,000 C. P87,000 D. P63,000
11. What is the total amount collected from the customer on December 31, 20x20?
A. P6,450,000 B. P6,500,000 C. P6,695,000 D. P6,662,500

12. If the discounting is secured borrowing, what is included in the journal entry to record the transaction?
A. Debit interest expense P87,000
B. Credit liability for the note discounted P6,000,000
C. Credit interest income P150,000
D. All of these are included in the journal entry

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