1.

It is a financing agreement whereby one party formally transfers its rights to

accounts receivables to another party in consideration for a loan
2 points

a. Pledge
b. Assignment
c. Factoring
d. Discounting

2. It is a financing arrangement that is usually done on a "without recourse notification

basis"
2 points

a. Pledge
b. Assignment
c. Factoring
d. Discounting

3. When the accounts receivable are factored

2 points

a. Accounts receivable shall be credited

b. Payable to factor is credited
c. A contingent liability is ordinarily created
d. The factoring is accounted for as a borrowing

4. When the accounts receivable of an entity are sold outright to a bank which
normally buys accounts receivable, the accounts receivable have been
2 points

a. Pledged
b. Assigned
c. Factored
d. Collateralized

5. Bam Company factored its accounts receivable without recourse with Tan Bank.
Bam received cash as a result of this transaction which is best described as
2 points

a. Loan from Tan collateralized by Bam's accounts receivable

b. Loan from Tan to be repaid by the proceeds from Bam's accounts receivable
c. Sale of Bam's accounts receivable to Tan, with the risk of uncollectible accounts retained by
Bam
d. Sale of Bam's accounts receivable to Tan, with the risk of uncollectible transferred to Tan
6. If a note receivable is discounted with recourse
2 points

a. A contingent liability does not exist

b. Note receivable discounted is credited
c. Liability for note receivable discounted is credited
d. Note receivable must be credited

7. All but one of the following are required before a transfer of receivables can be
recorded as sale
2 points

a. The transferred receivables are beyond the reach of the transferor and its creditors
b. The transferor has not kept effective control over the transferred receivables through a
repurchase agreement
c. The transferor maintains continuing involvement
d. The transferee can pledge or sell the transferred receivables

Use the following information for 8 and 9. On December 1, 2021, Run Company
assigned Php400,000 of accounts receivable to Idol Company as a security for a loan
of Php335,000. Run company charged a 2% commission on the amount of the loan,
the interest rate on the note was 10%. During December, Run collected Php110,000 on
assigned accounts after deducting Php380 of discounts. Run accepted returns worth
Php1,350 and wrote off assigned accounts totaling Php2,980. 8. How much cash did
Run receive from Idol at the time of the transfer?
4 points

a. Php301,500
b. Php327,000
c. Php328,300
d. Php335,000

335,000-6,700 = 328,300

9. What is the carrying value o the accounts receivable assigned as of December 31,
2021?
4 points

a. Php 0
b. Php285,290
c. Php289,620
d. Php290,000
 400,000 – 110,000-380,000

1,350-2,980 = 285,290

Use the following information for 10 and 11. On October 31, 2021, Butter Company
engaged in the following transactions: 1. Obtained a Php500,000, six month loan from
Dope Bank, discounted at 12%. The company pledged Php500,000 of accounts
receivable as security for the loan. 2. Factored Php1,000,000 of accounts receivable
without recourse on a non notification basis with DNA Company. DNA charged a
factoring fee of 2% of the amount of receivables factored and withheld 10% of the
amount factored. 10. What is the total amount of cash received from the financing of
the receivables?
4 points

a. Php1,320,000
b. Php1,350,000
c. Php1,380,000
d. Php1,470,000

11. What is the amount of cash received from the pledged accounts receivables?
4 points

a. Php880,000
b. Php980,000
c. Php470,000
d. Php440,000