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BA 114.1 A.Y.
2015-2016
Problem Set #2- Accounts Receivable
1. Abanador Inc. assigns P1,500,000 of its accounts receivable as collateral for a P1 million loan
with a bank. The bank assesses a 3% finance fee and charges interest on the note at 6%.
What would be the journal entry to record this transaction?
a. Debit Cash for P970,000, Debit Finance change for P30,000 and credit Notes Payable
for P1,000,000
b. Debit Cash for P100,000, Credit Finance change for P30,000 and credit Notes
Payable for P970,000
c. Debit Cash for P970,000, Debit Finance change for P30,000, debit Due from Bank for
P500,000 and credit Accounts Receivable for P1,500,000
d. Debit Cash for P910,000, Debit Finance change for P90,000, and credit Notes
Payable for P1,000,000
Answer: A
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2. On December 1, 2011, Abengoza Company assigned P400,000 of accounts receivable to
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Aficial Company as a security for a loan of P335,000. There is a 2% commission charged on
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the amount of the loan; the interest rate on the note was 10%. During December, Abengoza
collected P110,000 on assigned accounts after deducting P380 of discounts. Abengoza
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accepted returns worth P1,350 and wrote off assigned accounts totalling P2,980.How much
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cash did Abengoza receive from Aficial at the time of the transfer?
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Answer:
Loan Value P335,000
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Less: Commission expense (6,700) (335,000x2%)

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Cash Received P328,300

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3. What is the carrying value of the accounts receivable assigned as of December 31, 2011?
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Answer:
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Account Receivable assigned P400,000

Less: Amount collected P110,000
Sales Discounts 380
Sales Returns 1,350
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Write-off 2,980 114,170

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Carrying value of A/R assigned P285,290
4. On December 1, 2011, Agurang Company assigned on a non-notification basis accounts

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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 on 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 of 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
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of the loan. In its December 31, 2011 statement of financial position, what amount of note
payable should Agurang report as current liability?
Answer:
Total loan (P3M x80%) P2,400,000
Less: Principal payment:
Total payment P2,000,000
Less: Payment for interest (2.4M x1%) (24,000) 1,976,000
Note payable balance P424,000
5. On October 31, 2011, Amoroso Company engaged in the following transactions:

Obtained a P500,000 six month loan from City Bank discounted at 12%. The company
pledged P500,000 of accounts receivable as security for the loan.
Factored P1,000,000 of accounts receivable without recourse on a non notification basis
with Aniag Company. Aniag charged a factoring fee of 2% of the amount of receivables
factored and withheld 10% of the amount factored.
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What is the total cash received from the financing of receivables?
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Answer:
Pledging [P500K- (P500Kx12%x6/12)] P470,000
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Factoring [P1M- (100%-2%-10%)] 880,000
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Total proceeds P1,350,000
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6. On February 1, 2011, Anchoris Corp. factored receivables with a carrying amount of
P2,000,000 to Bautista Corp. Anchoris Corp. assesses a finance charge of 3% of the
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receivables and retains 5% of the receivables. If the factoring is treated as sale, what
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amount of loss from the sale should the company report in its 2011 statement of
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comprehensive income for the year 2011?
Answer:
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Rule: When the financial asset is dereccognized in its entirety, the difference between
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the carrying amount and the sum of consideration received (including any new asset
obtained less any liability) assumed shall be recognized in profit or loss.
In this problem, this is equal to the finance charge of 60,000.
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7. Continuing from number #6, assume that Anchoris Corp retained significant amount of risk
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and rewards of ownership and had a continuing involvement on the factored financial asset,
what amount of loss from factoring should the company recognize?
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Answer: Asset is not derecognized based on IFRS 9 par 3.2.4-3.2.6 (Read!), hence, no
gain/loss or 0.
8. Bernardez Company provided some information on their financial records on December 31,
2011.
(a) Accounts Receivable, January 1 P1,920,000
(b) Collections of accounts receivable 6,240,000
(c) Bad debts 200,000
(d) Inventory, January 1 2,880,000
(e) Inventory, December 31 2,640,000
(f) Accounts payable, January 1 1,000,000
(g) Accounts payable, December 31 1,500,000
(h) Cash sales 1,200,000
(i) Purchases 4,800,000
(j) Gross Profit on Sales 2,160,000
What is the ending balance of accounts receivable on December 31, 2011?
Answer:
Inventory, January 1 P2,880,000
Purchases 4,800,000
Total goods avaialable for sale 7,680,000
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Less: Inv., Dec. 31 2,640,000
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Cost of Sales 5,040,000
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Add: Gross Profit 2,160,000
Total Sales 7,200,000
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Less: Cash Sales 1,200,000
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Sales on Account 6,000,000
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Add: A/R, January 1 1,920,000
Total 7,920,000
Less: Collections on A/R 6,240,000
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A/R, Dec 31 1,680,000

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9. On the December 31, 2011 balance sheet of Microwave Company, the current receivables
consisted of the following:
(a) Trade Accounts Receivable P232,500
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(b) Allowance for uncollectible accounts (5,000)

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(c) Claim against shipper for goods lost in transit 7,500

(d) Selling price of unsold goods sent by Microwave to consignee 65,000
(e) Security deposit on lease of warehouse used for storing inventories 75,000
At December 31, 2011, how much should be Microwave’s total current net receivables?
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Answer:
Trade accounts receivable P232,500
Allowance for uncollectible accounts (5,000)
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Claim Receivable 7,500

Total current net receivables 235,000
10. Atienza Corporation had the following information relating to its accounts receivable:
(a) Accounts receivable P1,950,000
(b) Credit sales for 2011 8,100,000
(c) Collections from customers for 2011 7,125,000
(d) Accounts written off, August 30, 2011 187,500
(e) Estimated uncollectible receivables per aging,12/31 P247,500
In the December 31, 2011 statement of financial position, what is the amortized cost of
the receivable?
Answer:
A/R, Dec 31, 2010 P1,950,000
Add: Credit Sales 8,100,000
Total 10,050,000
Less: Collections P7,125,000
Write off 187,500 7,312,500
A/R, Dec 31, 2011 2,737,500
Less: Estimated uncollectible accounts 247,500
Amortized Cost P2,490,000
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11. On December 31, 2011, the “Receivables” account of Buban Company shows an amortized
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cost of P1,950,000. Subsidiary details show the following: Trade accounts receivables,
P775,000; Trade notes receivable, P100,000; Instalment receivable, normally due 1-2 years,
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P300,000; Customers accounts reporting credit balances, arising from advance payments,
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P20,000; Cash advances to subsidiary, P400,000, Claims from insurance company, P15,000;
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Subscription receivable due in 60 days, P300,000; Accrued interest receivable, P10,000. How
much should be presented as trade and other receivables under current assets?
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Answer:
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Trade accounts receivable P775,000

Trade notes receivable 100,000
Installments Rceivable 300,000
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Claims from insurance company 15,000

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Subscription receivable 300,000

Acc. Interest Receivable 10,000
Trade and other receivables P1,500,000
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12. Aurelio Factors provides financing to other companies by purchasing their accounts
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receivable on a non-recourse basis. Aurelio charges a commission to its clients of 15% of all
receivables factored. In addition, Aurelio withholds 10% of the receivables factored as
protection against sales returns or other adjustments. Aurelio credits the 10% withheld to
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Client Retainer and makes payments to clients at the end of each month so that the balance
in the retainer is equal to 10% of unpaid receivables at the end of the month. Aurelio
recognizes its 15% commissions as revenue at the time the receivables are factored. Also,
experience has led Aurelio to establish an allowance for bad debts of 4% of all receivables
purchased.
On January 2, 2011, Aurelio purchased receivables from Catindig Company totalling
P1,500,000. Catindig had previously established an ADA for these receivables of 35,000. By
January 31, Aurelio had collected P1,200,000 on these receivables. What amount of loss on
factoring should Catindig recognize on the sale of its receivable?
Answer:
Receivable factored P1,500,000
Less: Receivable from Factor 150,000
Less: Commission (1.5M x 15%) 225,000
Proceeds to be received 1,125,000
Plus: Asset Assumed (Receivable from factor) 150,000
Less: Carrying amount of A/R (1.5M-35K) 1,465,000
Loss on factoring 190,000
(includes commission expense)
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13. Bermudez Company has an 8% note receivable dated June 30, 2009, in the original amount
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of P600,000. Payments of P200,000 in principal plus accrued interest are due annually on
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July 1, 2010, 2011, and 2012. In its June 30, 2010 statement of financial position, what
amount should Bermudez Company report as current asset for interest on the note
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receivable?
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Answer:
Original amount P600,000
X Interest Rate 8%
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Accrued Interest P48,000

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14. Chavez received from a customer a one-year P375,000 note bearing annual interest of 8%.
After holding the note for six months, Chavez discounted the note at Super Bank at an
effective interest rate of 10%. How much did Chavez receive from the bank?
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Answer:
Interest (375,000x8%) P30,000
Maturity Value (375+30) 405,000
Discount (405x10%x6/12) (20,250)
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Proceeds 384,750
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15. Continuing from question 14, if the discounting is treated as a sale, what amount of loss on
discounting should Chavez recognize?
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Answer:
Proceeds from discounting P384,750
CV of the note:
Principal P375,000
Interest 15,000 390,000
Loss on discounting 5,250
16. On December 31, 2015, Bustamante Company finished consultation services and accepted
in exchange a promissory note with a face value of P200,000 a due date of December 31,
2018, and a stated rate of 5%, with interest receivable at the end of each year. The fair value
of the services is not readily determinable and the note is not readily marketable. Under the
circumstances, the note is considered to have an appropriate imputed interest rate of
interest of 10%. How much is the note receivable reported on December 31, 2015?
Answer:
Present value of interest 24,869
Present value of face value 150,264
Present value of note approx. 175,133
17. Chua granted an 8% 3-year P6,000,000 loan to Cauntay Company on January 1, 2010. The
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interest on the loan is payable every December 31. Chua incurred P520,600 of direct
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origination cost but an origination fee of P200,000 was charged against Cauntay Company.
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The effective rate on the loan as a result of the origination fee and cost is now 6%. What is
the carrying value of the loan on December 31, 2011 in Chua’s accounting books?
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Answer: rs e
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Loan P6,000,000
Origination fee (200,000)
Origination Cost 520,600
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CV of loan 6,320,600
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After amortization 6,113,026

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18. Dela Cruz Company purchased from Constantino Corp. a P400,000 8% five-year note that
requires five annual year-end instalments of P100,180. The note was discounted to yield a
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9% rate to Dela Cruz. At the date of the purchase, Dela Cruz recorded the note at its present
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value of P389,700. What is the total unearned interest revenue that will be realized over the
term of the financial instrument?
Answer:
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Future Value P500,900

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Present value 389,700

Total Interest Revenue 111,200
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19. Delgado Company accepted a P200,000, 90-day note dated November 15, 2011 from a
customer. On December 15,, 2011, Delgado discounted the note at Finance Company at
15% discount rate. Delgado informed the maker of the note regarding the discounting
arrangement. On maturity date, the maker of the note did not pay the note and as a result
Finance Company charged Delgado for the total amount due plus P2, 000 protest fee. How
much should Delgado pay Finance Company when the maker dishonoured the note upon
maturity?
Answer:
Maturity Value P200,000
Protest Fee 2,000
Total amount due 202,000
20. Continuing from number 19, what amount of interest income should Delgado recognize
related to the notes receivable in its December 31, 2011 statement of financial position?
Answer: Bonus
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BA 114.1 A.Y.

Less: Commission expense (6,700) (335,000x2%)

Cash Received P328,300

Account Receivable assigned P400,000

Write-off 2,980 114,170

Carrying value of A/R assigned P285,290

4. On December 1, 2011, Agurang Company assigned on a non-notification basis accounts

5. On October 31, 2011, Amoroso Company engaged in the following transactions:

comprehensive income for the year 2011?

A/R, Dec 31 1,680,000

(b) Allowance for uncollectible accounts (5,000)

(c) Claim against shipper for goods lost in transit 7,500

Claim Receivable 7,500

Trade accounts receivable P775,000

Claims from insurance company 15,000

Subscription receivable 300,000

Accrued Interest P48,000

After amortization 6,113,026

Future Value P500,900

Present value 389,700

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