MC Questions

Choose the best possible Answer. For the MC Problems, kindly attach a picture of your handwritten solution in
good form.

Which statement is incorrect? *

2 points

The amount of Accounts Receivable (A/R) pledged should be excluded from A/R in the balance sheet.
When A/R are assigned on a notification basis, the company reduces liability and A/R account for the net
amount of collections of A/R.
In factoring A/R as a continuing agreement, the buyer of A/R protects himself from risks arising from
discounts, returns and allowances thru by withholding a portion of the amount of A/R.
answer not given

On October 31, 2020, KTA Co. engaged in the following transactions: [1] Obtained a
P500,000, 6-month loan from City Bank, discounted at 12%. The company pledged
P500,000 of accounts receivable (A/R) as security for the loan. [2] Factored
P1,000,000 of A/R without recourse on a non-notification basis to JRM Co. which
charged a factoring fee of 2% of A/R factored and withheld 10% of the A/R factored.
What is the total cash received from the financing of receivables? *
3 points

P1,320,000
P1,350,000
P1,380,000
P1,470,000
answer not given

*
3 points
P400,000
P445,380
P529,380
P558,000

Which is true when a company uses the net price method of recording receivables? *
2 points

The company records the total invoice price in both the “A/R” and “sales” accounts at the time of sale as if
no cash discount is involved
Sales discount taken is deducted from sales on the income statement to determine net sales
Cash discount is reflected in the accounting records only when the discount is taken
Cash discount is reflected in the accounting records only when the discount is not taken
answer not given

At the end of its first year of operations, December 31, 2020, Mike Co. had accounts
receivable of P6,000,000, net of the related allowance for doubtful accounts. During
2020, Mike Co. recorded charges to bad debt expense of P900,000 and wrote off
P200,000 of uncollectible accounts receivable. On December 31, 2020, how much
report as accounts receivable before the allowance for doubtful accounts? *
3 points
P6,000,000
P6,200,000
P6,700,000
P7,100,000
answer not given

Which statement is incorrect? *

2 points

Net realizable value of accounts receivable (A/R) results when A/R is reduced by allowance for doubtful
accounts
Credit balances in A/R arising from customer’s advances should be excluded from A/R.
The allowance method of recording bad debt loss is the one consistent with accrual accounting.
none of the above

On July 1, 2019, EVE Co. sold equipment to ADAN Co. for P250,000. EVE Co.
accepted a 10% note receivable of the entire sales price. This note is payable in 2
equal installments of P125,000 plus accrued interest on December 31,2019, and
December 31, 2020. On July 1, 2020, Olive discounted the note at a bank at an
interest rate of 12%. How much was Olive’s proceeds from the discounted note? *
3 points

P121,000
P123,375
P125,875
P129,250

What principle does impairment of loan receivable depicts? *

2 points

Going concern
Conservatism
Economic Entity Theory
Timeliness

The interest on a non-interest bearing note is equal to *

2 points

zero
excess of market value over present value of note
excess of present value over face value of note
excess of face value over present value of note
answer not given

Which is not a non- trade receivable? *

2 points

Accrued rent income

Claims receivable
Subscriptions receivable
Advances from customer
none of the above

If a note receivable is discounted with recourse, which will not hold true? *
2 points

a contingent liability exists

note receivable discounted will be credited
liability for note receivable discounted will be credited
note receivable will be credited upon settlement of note
none of the above

The entry debiting A/R and crediting ABD would be made when *
a customer account is collected
a customer defaults payment
a previously defaulted account is collected
estimated uncollectible receivables are too low

*
3 points

P3,711,500
P4,000,000
P4,411,500
P4,650,000

*
3 points

P2,200,000
P2,400,000
P2,300,000
P3,000,000
answer not given

On December 1, 2020, MAD Co. assigned on a non-notification basis accounts

receivable of P3,000,000 to a bank in consideration for a loan of 80% of the
receivables less a 5% service fee on the accounts assigned. The interest rate of the
loan is 12% per annum. The company collected assigned accounts of P2,000,000 and
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 interest rate is
1% per month on the outstanding balance of the loan. In its December 31,2020
balance sheet, what amount of note payable should MAD Co. report as current
liability? *
3 points

P0
P400,000
P424,000
P1,024,000
answer not given

Accounting for the interest in a non-interest bearing note receivable is an example of

what accounting theory? *
2 points

matching
verifiability
substance over form
Form over substance
answer not given

STRAIGHT PROBLEMS
Use 4 decimal places for Present Value factors, UNLESS the problem says otherwise.
1.Write your FINAL ANSWER on this google form, in WHOLE NUMBER only.
Example: P10,987.45 should be written as 10987.

2.Write your solutions on paper with your name on the upper left hand corner of each page that you will use.
3. Present solutions in good accounting form and encircle your final answer.
4. The final answer ON YOUR PAPER should be the same amount on this GOOGLE FORM.
5. Kindly attach a picture or scanned copy of your handwritten solution in good form.

POINT SYSTEM: 1 point (google forms) 3 points (solution)

On January 2, 2020, PAGODA Inc. sold equipment with a cost of P700,000 and
accumulated depreciation of P220,000 in exchange for a P600,000 non-interest-
bearing note due January 2, 2023. There was no established exchange price for the
equipment. The prevailing rate of interest for a note of this type at January 2, 2020
was 10%. How much is the gain (loss) on sale of equipment? *
1 point

Your answer

On January 1, 2020, KTA Inc. sold merchandise to Candy Merchandising in exchange

for a non-interest bearing note requiring 10 annual payments of P100,000. Candy
Merchandising made the first payment on December 31, 2020. The prevailing market
interest rate for similar notes is 8%. How much is the Interest income recognized
during 2021? *
1 point

Your answer

On Dec. 31, 2019, TIGASIN Co. has allowance for doubtful accounts of P4,000. Each
month, TIGASIN Co. makes interim provision for bad debts equal to 1% of credit
sales. During 2020, total credit sales are P1,000,000 and P16,000 of accounts
receivable is written off. Aging of A/R at December 31, 2020 indicates that an
allowance of P20,000 should be provided for doubtful accounts as of that date. How
much is the total amount of debit or total amount of credit in the adjusting entry (if
there is any) to be made on Dec. 31, 2020? *
1 point

Your answer

*
1 point
Your answer

*
1 point
Your answer

On January 1, 2020, KTA Inc. sold merchandise to Candy Merchandising in exchange

for a non-interest bearing note requiring 10 annual payments of P100,000. Candy
Merchandising made the first payment on December 31, 2020. The prevailing market
interest rate for similar notes is 8%. How much is the value of notes receivable as of
December 31, 2021? *
1 point

Your answer

On October 1, 2020, SABM Inc. discounted its own note of P500,000 at 10% for one
year. In its statement of financial position on December 31,2020, what is the carrying
amount of note payable to be presented by SABM Inc. as current liability? *
1 point
Your answer

*
1 point

Your answer

*
1 point
Your answer