1.

Faith Company provided the following information relating to current operations:

Accounts receivable, Jan. 1 4,000,000

Accounts receivable collected 8,400,000
Cash sales 2,000,000
Inventory, Jan.1 4,800,000
Inventory, Dec. 31 4,400,000
Purchases 8,000,000
Gross margin on sales 4,200,000

What is the balance of accounts receivable on December 31?

a. 8,200,000
b. 6,200,000
c. 2,000,000
d. 4,200,000

2. Jinx Company provided the following information for the current year in relation to accounts receivable:

Accounts receivable, Jan.1 1,300,000

Credit sales 5,500,000
Sales returns 150,000
Accounts written of 100,000
Collections from customers 5,000,000
Estimated future sales return on Dec. 31 50,000
Estimated uncollectible accounts per aging at year-end 250,000

What amount should be reported as net realizable value of accounts receivable on Dec. 31?
a. 1,550,000
b. 1,250,000
c. 1,300,000
d. 1,500,000

3. Valiant Company reported the following analysis of current receivables at year-end:

Trade accounts receivable 2,000,000

Allowance for doubtful accounts ( 100,000 )
Claim against shipper for goods lost in transit in Nov. 300,000
Selling price of unsold goods sent by Valiant on consignment 600,000
At 150% of cost and not included in ending inventory
Security deposit on lease of warehouse 200,000
Total 3,000,000

What total amounts should be reported as current trade and other receivables?
a. 2,200,000
b. 2,400,000
c. 2,300,000
d. 3,000,000

4. At the end of the first year of operations, Majestic Company had accounts receivable of P6,000,000, net of the related
allowance for doubtful accounts.

During the current year, the entity recorded charges to bad debt expense of P900,000 and wrote of P200,000 of
uncollectible accounts receivable.
At year-end, what amount should be reported as accounts receivable before the allowance for doubtful accounts?
a. 6,000,000
b. 6,200,000
c. 6,700,000
d. 7,100,000

5. Rapture company had the following information for the current year relating to accounts receivable:

Accounts receivable at Jan. 1 1,300,000

Credit sales 5,400,000
Collections from customers, excluding recovery 4,750,000
Accounts written of 125,000
Collection of accounts written of in prior year, customer credit
Was not reestablished 25,000
Estimated uncollectible receivables per aging at Dec. 31 165,000

What is the balance of accounts receivable, before allowance for doubtful accounts, on Dec. 31?
a. 1,825,000
 b. 1,850,000
c. 1,950,000
d. 1,990,000

6. Scant Company reported the following balances after adjustment at year-end.

2018 2017

Accounts receivable 5,250,000 4,800,000

Net realizable value 5,100,000 4,725,000

During 2018, the entity wrote of customer accounts totaling P160,000 and collected P40,000 on accounts written of in
previous years.

What amount should be reported as doubtful accounts expense for the year ended Dec. 31, 2018?
a. 195,000
b. 150,000
c. 120,000
d. 150,000

7. Mill Company’s allowance for doubtful accounts was P1,000,000 at the end of 2018 and P900,000 at the end of 2017.
For the year ended Dec. 31, 2018, the entity reported doubtful accounts expense of P160,000 in the income statement.

What amount was debited to the appropriate account to write of uncollectible accounts in 2018?
a. 260,000
b. 100,000
c. 160,000
d. 60,000

8. Regalia Company used the allowance method accounting for uncollectible accounts.
During the current year, the entity had charged P800,000 to bad debt expense, and wrote of accounts receivable of
P900,000 as uncollectible.

What was the decrease in working capital as a result of the transactions relating to accounts receivable?
a. 900,000
b. 800,000
c. 100,000
d. 0

9. Omega Company prepared an aging of accounts receivable on Dec. 31 and determined that the net realizable value of the
accounts receivable was P2,500,000.

Allowance for doubtful accounts on Jan. 1 280,000

Accounts written of as uncollectible 230,000
Accounts receivable on Dec. 31 2,700,000
Uncollectible accounts recovery 50,000

What is the doubtful accounts expense for the current year?

a. 230,000
b. 200,000
c. 150,000
d. 100,000

10. At the beginning of current year, Malice Company reported allowance for doubtful accounts of P300,000.

During the current year, the entity charged P650,000 to doubtful accounts expense, wrote of P450,000 of uncollectible
accounts receivable, and unexpectedly recovered P100,000 of bad debts written of in the prior year.

What is the allowance for doubtful accounts at year-end?

a. 500,000
b. 600,000
c. 650,000
d. 950,000

( 11- 13 ) Delta Company sold goods to wholesalers on terms 2/15, net 30. The entity had no cash sales but 50% of the
customers took advantage of the discount.

The entity used the gross method of recording sales and accounts receivable.
An analysis of the trade accounts receivable at year-end revealed the following:

Age Amount Collectible

0-15 days 2,000,000 100%
 16-30 days 1,400,000 95%
31-60 days 400,000 90%
Over 60 days 200,000 50%
4,000,000

11. What amount should be reported as allowance for sales discount at year-end?
a. 20,000
b. 32,400
c. 33,500
d. 40,000

12. What amount should be reported as allowance for doubtful accounts at year-end?
a. 230,000
b. 210,000
c. 190,000
d. 200,000

13. What is the net realizable value of accounts receivable at year-end?

a. 4,000,000
b. 3,750,000
c. 3,770,000
d. 3,790,000

14. Gruesome Company provided the following information for the current year:

Allowance for doubtful accounts on Jan. 1 200,000

Credit sales 5,000,000
Accounts receivable deemed worthless and written of 300,000

As a result of a review and aging of accounts receivable, it has been determined that an allowance for doubtful accounts of
P400,000 is needed on Dec. 31.

What amount should be recorded as doubtful accounts expense for the current year?
a. 400,000
b. 300,000
c. 500,000
d. 700,000

15.Tantrum Company provided the following information in relation to accounts receivable at year-end:

Days Estimated % uncollectible

Outstanding Amount
0-60 1,200,000 1%
61-120 900,000 2%
Over 120 1,000,000 6%
3,100,000

During the current year, the entity wrote of P70,000 in accounts receivable and recovered P20,000 that had been written
of in prior years.
At the beginning of current year, the allowance for uncollectible accounts was P60,000.

Under the aging method, what amount of uncollectible accounts expense should be reported for the current year?
a. 90,000
b. 80,000
c. 70,000
d. 60,000

16. Bestial Company reported the following accounts at year-end before adjustments:

Debit Credit
Allowance for doubtful accounts 5,000
Sales 7,200,000
Sales returns 200,000

The entity estimated uncollectible accounts receivable at 2% of net sales.

What amount of doubtful accounts expense should be reported for the current year?
a. 140,000
 b. 145,000
c. 141,000
d. 144,000

17. Namesake Company reported the following unadjusted balances at year-end:

Debit Credit

Accounts receivable 3,000,000

Allowance for doubtful accounts 10,000
Net credit sales 8,000,000

The entity estimated that 3% of the gross accounts receivable would become uncollectible

What amount should be reported as doubtful accounts expense for the current year?
a. 240,000
b. 100,000
c. 90,000
d. 80,000

( 18-20 ) At year-end, Ludicrous Company reported accounts receivable of P6,000,000 and allowance for doubtful accounts
of P300,000 at the beginning of year.

Outstanding Accounts receivable Probability of collection

Under 15 days 3,000,000 .96

16-30 days 2,000,000 .90
31-45 days 400,000 .80
46-60 days 300,000 .70
61-75 days 200,000 .65
Over 75 days 100,000 .00

The accounts which have been outstanding over 75 days and have zero probability of collection would be written of
immediately.

18. What is the appropriate balance of the allowance for doubtful accounts at year-end?
a. 560,000
b. 660,000
c. 260,000
d. 360,000

19. What amount should be reported as doubtful accounts expense for the current year?
a. 360,000
b. 100,000
c. 460,000
d. 260,000

20. What is the net realizable value of accounts receivable at year-end?

a. 5,340,000
b. 5,900,000
c. 5,440,000
d. 5,600,000

21. Oasis Company followed the procedure of debiting bad debt expense for 2% of all new sales.
Sales for three consecutive years and year-end allowance account balances were as follows:

Sales Allowance for bad debts

2015 3,000,000 40,000
2016 2,800,000 60,000
2017 3,500,000 80,000

What was the amount of accounts written of in 2017?

a. 50,000
b. 70,000
c. 10,00
d. 86,000

22. Efective with the current year, Fateful Company adopted a new accounting method for estimating the allowance for
doubtful accounts at the amount indicated by the year-end aging of accounts receivable.

Allowance for doubtful accounts, Jan. 1 250,000

Provision for doubtful accounts during the year 200,000
 (2% on credit sales of P10,000,000)
Accounts written of during the year 205,000
Estimated uncollectible accounts per aging, Dec. 31 220,000

What amount should be reported as doubtful accounts expense for the current year?
a. 220,000
b. 205,000
c. 200,000
d. 175,000

23. Vagabond Company had net sales of P8,000,000 during the current year.
At year-end, before adjusting entries, the balances in selected accounts were accounts receivable P2,000,000 debit and
allowance for doubtful accounts P20,000 debit.
The entity estimated that 5% of accounts receivable will prove to be uncollectible.

What is the net realizable value of the accounts receivable at year-end?

a. 2,000,000
b. 1,900,000
c. 1,880,000
d. 1,920,000

24. Castaway Company provided the following information for the current year:

Allowance for doubtful accounts – Jan. 1 200,000

Sales – all on credit 9,500,000
Sales discounts 1,000,000
Sales returns and allowances 500,000
Accounts written of as uncollectible 100,000
Recovery of accounts written of 50,000

The entity recorded doubtful accounts expense at the rate of 5% of net credit sales.
What amount should be reported as allowance for doubtful accounts on Dec. 31?
a. 450,000
b. 625,000
c. 600,000
d. 550,000

( 25 – 27 )Germany Company started business at the beginning of current year. The entity established an allowance for
doubtful accounts estimated at 5% of credit sales.
During the year, the entity wrote of P50,000 of uncollectible accounts.
Further analysis showed that merchandise purchased amounted to P9,000,000 and ending merchandise inventory was
P1,500,000. Goods were sold at 40% above cost.
The total sales comprised 80% sales on account and 20% cash sales.

Total collections from customers, excluding cash sales, amounted to P6,000,000.

25. What is the cost of goods sold?
a. 7,500,000
b. 5,400,000
c. 3,600,000
d. 6,900,000

26. What is the amount of sales on account?

a. 10,500,000
b. 18,750,000
c. 12,000,000
d. 8,400,000

27. What is the net realizable value of accounts receivable at year-end?

a. 1,980,000
b. 2,350,000
c. 1,930,000
d. 2,400,000

( 28-29 ) Colossal Company provided the following transactions afecting accounts receivable during the year ended December
31, 2017:

Sales – cash and credit 5,900,000

Cash received from credit customers, all of whom took advantage
Of the discounts feature of entity’s credit terms 4/10, n/30 3,024,000
Cash received from cash customers 2,100,000
Accounts receivable written of as worthless 50,000
 Credit memorandum issued to credit to customers for sales
Returns and allowances 250,000
Cash refunds given to cash customers for sales returns and allowances 20,000
Recoveries on accounts receivable written of as uncollectible
In prior periods not included in cash amount stated above 80,000

The following balances were taken from the January 1, 2017 statement of financial position:

Accounts receivable 950,000

Allowance for bad debts 90,000

The entity provided for net uncollectible account losses by crediting allowance for bad debts for 2% of net credit sales for the
current period.

28. What is the balance of accounts receivable on December 31, 2017?

a. 1,300,000
b. 1,426,000
c. 1,280,000
d. 1,220,000

29. What is the balance of allowance for bad debts after adjustment on December 31, 2017?
a. 120,000
b. 188,480
c. 108,480
d. 188,080

( 30-32 ) On January 1, 2017, Easy Company reported accounts receivable P2,070,000 and allowance for doubtful accounts
P80,000.

Credit sales Write offs Recoveries

2014 11,100,000 260,000 22,000
2015 12,250,000 295,000 37,000
2016 14,650,000 300,000 36,000
2017 15,000,000 310,000 40,000

The collections from customers during 2017 totaled P14,000,000 excluding recoveries.
Doubtful accounts are provided for as a percentage of credit sales.
The entity calculated the percentage annually by using the experience of the three years prior to the current year.

30. What amount should be reported as doubtful accounts expense for 2017?
a. 310,000
b. 300,000
c. 222,000
d. 378,000

31. What amount should be reported as allowance foe doubtful accounts on December 31, 2017?
a. 110,000
b. 378,000
c. 300,000
d. 478,000

32. What is the net realizable value of accounts receivable on December 31, 2017?
a. 2,650,000
b. 2,690,000
c. 2,760,000
d. 2,800,000

33. On June 30, 2017, Pink Company sold goods for P5,000,000 and accepted the customer’s 10% one-year note in exchange.
The 10% interest rate approximates the market rate of return.

What amount should be reported as interest income for the year ended December 31, 2017?
a. 500,000
b. 250,000
c. 125,000
d. 0

34. Fame Company has an 8% note receivable dated June 30, 2016 in the original amount of P1,500,000. Payments of P500,000
in principal plus accrued interest are due annually on July 1, 2017, 2018 and 2019.

On June 30,2018, what amount should be reported as a current asset for accrued interest on note receivable?
a. 120,000
 b. 80,000
c. 40,000
d. 0

35. On June 30, 2017, Green Company accepted a customer’s P2,500,000 noninterest-bearing six-month note in a sale
transaction. The product sold normally sells for P2,300,000.

What amount should be reported as interest revenue for the year end December 31, 2017?
a. 200,000
b. 100,000
c. 250,000
d. 0

36. On December 31, 2017, Humility Company sold a machine to another entity in exchange for a noninterest-bearing note
requiring ten annual payments of P500,000. The buyer made the first payment on December 31, 2017.

The market interest rate for similar notes at date of issuance was 8%.

Period Present value of 1 at 8% Present value of ordinary annuity

of 1 at 8%
9 0.50 6.25
10 0.46 6.71

On December 31, 2017, what is the carrying amount of note receivable?

a. 2,250,000
b. 2,300,000
c. 3,125,000
d. 3,355,000

37. Judicious Company purchased a P2,000,000, 8%, five-year note that required five equal annual year-end payments of
P500,900. The note was discounted to yield a 9% rate to Judicious Company. At the date of purchased, the entity recorded
the note at the present value of P1,948,500.

What is the total interest revenue earned by the entity over the life of the note receivable?
a. 504,500
b. 556,000
c. 800,000
d. 900,000

38. On January 1, 2017, Savage Company sold goods to another entity. The buyer signed a non-interest bearing note requiring
payment of P600,000 annually for seven years. The first payment was made on January 1, 2017.
The prevailing rate of interest for this type of note at date of issuance was 10%.

Periods Present value of 1 at 10% Present value of ordinary annuity of 1 at 10%

6 .56 4.36
7 .51 4.87
What amount should be reported as sales revenue?
a. 3,216,000
b. 2,922,000
c. 2,616,000
d. 2,142,000

39. At the beginning of year, Touch Company sold a piece of machinery with a list price of P1,600,000 to archer Company.
Archer company issued a noninterest bearing note of P1,700,000 due in one year. Touch company normally sells this type of
machinery for 90% of list price.
a. 100,000
b. 260,000
c. 160,000
d. 0

( 40-41)

On December 31, 2017, Jovial company received two P1,000,000 notes receivable from customers in exchange for services
rendered.

On both notes, interest is calculated on the outstanding principal balance at the annual rate of 3% and payable at maturity.

The note from zeta Company, made under customary trade terms, is due in nine months and the note from Yola Company is
due in five years.

The market interest rate for similar notes on December 31, 2017 was 8%.
 The present value of 1 due in nine months is .944 and the present value of 1 due in five years is .68

40. At what amount should the notes receivable from Zeta Company be reported on December 31, 2017?
a. 1,000,000
b. 944,000
c. 965,200
d. 972,320

41. At what amount should the note receivable from Yola Company be reported on December 31, 2017?
a. 1,000,000
b. 782,000
c. 932,000
d. 680,000

(42-45)

Persevere Company is a dealer in equipment. On December 31, 2017, the entity sold an equipment in exchange for a
noninterest bearing note requiring five annual payments of P500,000. The first payment was made on December 31, 2018.

The market interest rate for similar notes was 8%.

PV of 1 at 8% for 5 periods 0.68

PV of an ordinary annuity of 1 at 8% for 5 periods 3.99

42. On December 31, 2017, what is the carrying amount of note receivable?
a. 2,500,000
b. 1,995,000
c. 1,700,000
d. 1,495,000

43. What amount of interest income should be reported for 2018?

a. 505,000
b. 101,000
c. 159,600
d. 119,600

44. What is the carrying amount of the note receivable on December 31,2018?
a. 1,654,600
b. 2,154,600
c. 2,000,000
d. 1,495,000

45. What amount of interest income should be reported for 2019?

a. 132,368
b. 172,368
c. 160,000
d. 200,000

(46-49)

On December 31, 2017, Precious Company sold an equipment with carrying amount of P2,000,000 and received a
noninterest-bearing note requiring payment of P500,000 annually for ten years. The first payment is due December 31,
2018.

The prevailing rate of interest for this type of note at date of issuance is 12%.

Present value of 1 at 12% for 10 periods 0.322

Present value of ordinary annuity of 1 at 12% for 10 periods 5.650

46. On December 31, 2017, what is the carrying amount of the note receivable?
a. 5,000,000
b. 2,175,000
c. 1,610,000
d. 2,825,000

47. What is the gain on sale of equipment to be recognized in 2017?

a. 3,000,000
b. 2,175,000
c. 825,000
d. 0
48. What amount of interest income should be recognized for 2018?
a. 600,000
b. 339,000
c. 319,000
d. 300,000

49. What is the carrying amount of the note receivable on December 31,2018?
a. 2,325,000
b. 4,500,000
c. 2,825,000
d. 2,664,000

(50-52)

On December 31, 2017, Flirt Company sold for 3,000,000 an old equipment having an original cost of 5,200,000 and carrying
amount of P2,200,000.

The terms of the sale were P600,000 down payment and P1,200,000 payable on December 31, of the next two years.

The sale agreement made no mention of interest. However, 9% would be a fair rate for this type of transaction.

The present value of an ordinary annuity of 1 at 9% for two years is 1.76.

50. What is the gain or loss on sale of equipment in 2017?

a. 800,000 gain
b. 800,000 loss
c. 512,000 gain
d. 88,000 loss

51. What is the interest income for 2018?

a. 216,000
b. 190,080
c. 108,000
d. 106,000

52. What is the carrying amount of the note receivable on December 31, 2018?
a. 1,200,000
b. 1,102,080
c. 2,302,080
d. 1,009,920

On January 1, 2017, Mill Company sold a building and received as consideration P1,000,000 cash and a P4,000,000
noninterest bearing note due on January 1, 2020. There was no established exchange price for the building and the note had
no ready market.

The prevailing rate of interest for a note of this type on January 1, 2017 was 10%. The present value of 1 at 10% for three
periods is 0.75.

53. What amount of interest revenue should be reported for 2018?

a. 370,000
b. 400,000
c. 300,000
d. 330,000

(54-55)

On January 1, 2017, Akin Company sold equipment with a carrying amount of 4,800,000 in exchange for a 6,000,000
noninterest-bearing note due January 1, 2020. There was no established exchange price for the equipment.

The prevailing rate of interest for a note of this type was 10%. The present value of 1 at 10% for three periods is 0.75.

54. What amount should be reported as interest income for 2017?

a. 600,000
b. 500,000
c. 450,000
d. 90,000

55. What amount should be reported as gain or loss on sale of equipment for 2017?
a. 1,200,000 gain
 b. 2,700,000 gain
c. 300,000 gain
d. 300,000 loss

(56-59)

On January 1, 2017, Allure Company sold an equipment with a carrying amount of 800,000, receiving a noninterest-bearing
note due in three years with a face amount of P1,000,000. There is no established market value for the equipment.

The interest rate on similar obligations is 12%. The present value of 1 at 12% for three periods is .712.

56. What amount should be reported as gain or loss on the sale of equipment in 2017?
a. 200,000 gain
b. 200,000 loss
c. 88,000 gain
d. 88,000 loss

57. What amount should be reported as interest income for 2017?

a. 288,000
b. 120,000
c. 96,000
d. 85,440

58. What is the carrying amount of note receivable on December 31,2017?

a. 1,000,000
b. 712,000
c. 797,440
d. 800,000

59. What amount should be reported as interest income for 2018?

a. 95,693
b. 96,000
c. 75,000
d. 60,000

Passion Company sold machinery on January 1, 2017 for which the cash selling price was P758,200. The buyer entered into
an installment sale contract at an implicit interest rate of 10%.

The contract required payment of P200,000 a year over 5 years with the first payment due on December 31, 2017.

60. What amount of interest income should be reported in 2018?

a. 20,000
b. 75,820
c. 63,402
d. 0

(61-62)

Audible Company sold a factory on January 1, 2017 for P7,000,000. The entity received a cash down payment of P1,000,000
and a 4-year, 12% note receivable for the balance.

The note is payable in equal annual payment of principal and interest of P1.975,400 payable on December 31 of each year
until 2020.

61. What is the interest income for 2017?

a. 840,000
b. 720,000
c. 120,000
d. 975,400

62. What is the carrying amount of the note receivable on December 31, 2017?
a. 4,500,000
b. 4,744,600
c. 4,624,600
d. 4,025,600

(63-65)

On December 1, 2017, Solvent Company assigned specific accounts receivable totaling P5,000,000 as collateral on a
P4,000,000 12% note from a certain bank. The entity will continue to collect the assigned accounts receivable.
 In addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance on the assigned
accounts.

The December collections of assigned accounts receivable amounted to P2,000,000 less cash discount of P200,000.

On December 31, 2017, the entity remitted the collections to the bank in payment for the interest accrued on December 31,
2017 and the note payable.

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

63. What amount of cash was received from the assignment of accounts receivable on December 1, 2017?
a. 4,000,000
b. 3,800,000
c. 4,750,000
d. 3,750,000

64. What is the carrying amount note payable on December 31, 2017?
a. 1,840,000
b. 2,140,000
c. 2,240,000
d. 2,200,000

65. What amount should be disclosed as the equity of Solvent Company in assigned accounts on December 31, 2017?
a. 260,000
b. 400,000
c. 360,000
d. 760,000

(66-67)

Brawny Company factored P8,000,000 of accounts receivable to a finance entity at the beginning of the current year. Control
was surrendered by Brawny Company.

The factor assessed a fee of 5% and retained a holdback equal to 10% of the accounts receivable.

In addition, the factor charged 15% interest computed on a weighted average time to maturity of the accounts receivable of
30 days.

66. What amount was initially received by Brawny Company from the factoring?
a. 6,701,370
b. 6,800,000
c. 7,501,370
d. 6,700,000

67. Assuming all accounts receivable are collected, what is the cost of factoring?
a. 400,000
b. 498,630
c. 898,630
d. 98,630

At the beginning of the current year, Moody Company sold P5,800,000 in accounts receivable for cash of P5,000,000. The
factor withheld 10% of the cash proceeds to allow for possible customer returns and other adjustments.

An allowance for bad debts of P600,00 had previously been established by Moody Company in relation to these accounts.

68. What was the loss on factoring recognized by Moody Company?

a. 200,000
b. 700,000
c. 500,000
d. 800,000

(69-70)

Crater Company factored with recourse P2,000,000 of accounts receivable with a bank. The finance charge is 3%, and 5%
was retained to cover sales discounts, sales returns and sales allowances.

69. What amount of cash was received on the sale of accounts receivable?
a. 1,940,000
b. 1,900,000
c. 1,840,000
d. 2,000,000
70. What amount should be recognized as loss on factoring?
a. 100,000
b. 160,000
c. 60,000
d. 0

(71-72)

Daisy Company sold accounts receivable without recourse with the face amount of P6,000,000. The factored charged 15%
commission on all accounts receivable factored and withheld 10% of the accounts factored as protection against customer
returns and other adjustments.

The entity had previously established an allowance for doubtful accounts of P200,000 fir the accounts factored. By year-end,
the entity had collected the factor’s holdback there being no customer returns and other adjustments.

71. What amount of cash was initially received from factoring?

a. 4,500,000
b. 5,400,000
c. 5,100,000
d. 6,000,000

72. What is the loss on factoring?

a. 700,000
b. 900,000
c. 200,000
d. 0

Camia Company sold accounts receivable without recourse for P5,300,000. The entity received P5,000,000 cash immediately
from the factor. The remaining P300,000 will be received once the factor verifies that none of the accounts receivable is in
dispute.

The accounts receivable had a face amount of P6,000,000. The entity had previously established an allowance for doubtful
accounts of P250,000 in connection with such accounts.

73. What amount of loss on factoring should be recognized?

a. 700,000
b. 450,000
c. 750,000
d. 300,000

(74-75)

Zeus Company factored P6,000,000 of accounts receivable to a finance entity at the beginning of current year. Control was
surrendered by Zeus Company.

The factor assessed a fee of 3% and retained a holdback equal to 5% of the accounts receivable.

In addition, the factor charged 15% interest computed on a weighted average time to maturity of the accounts receivable of
54 days.

74. What is the amount of cash initially received from the factoring?
a. 5,296,850
b. 5,386,850
c. 5,476,850
d. 5,556,850

75. If all accounts are collected, what is the cost of factoring the accounts receivable?
a. 313,150
b. 180,000
c. 433,150
d. 613,150

(76-78)

During the second year of operations,Fauna Company found itself in financial difficulties. The entity decided to use accounts
receivable as a means of obtaining cash to continue operations. On July 1, 2017, the entity sold P1,500,000 of accounts
receivable for cash proceeds of P1,390,000. No bad debt allowance was associated with these accounts.
 On December 15,2017, the entity assigned the remainder of the accounts receivable, P5,000,000 as of that date, as
collateral on a 2,500,000, 12% annual interest rate loan. the entity received P2,500,000 less a 2% finance charge. None of
the assigned accounts had been collected by the end of the year.

Allowance for bad debts before adjustment, 12/31/2017 100,0000

Estimated uncollectible, 12/31/2017 10% of accounts receivable
Accounts receivable not including
Factored and assigned accounts 12/31/2017
Accounts receivable-assigned
Accounts receivable-factored

76. What is the total amount of cash received from the financing of accounts receivable during the year?
a. 3,840,000
b. 1,390,000
c. 3,890,000
d. 3,540,000

77. What is the total amount of accounts receivable that should be reported as current assets on December 31, 2017?
a. 6,000,000
b. 1,000,000
c. 5,000,000
d. 7,500,000

78. What is the bad debts expense for the current year?
a. 600,000
b. 500,000
c. 650,000
d. 750,000

(79-80)

Foremost Company received from a customer a one-year, P500,000 note bearing annual interest of 8%. After holding the
note for six months, the entity discounted the note at the bank at an efective interest rate of 10%.

79. What amount of cash was received from a bank?

a. 540,000
b. 523,810
c. 513,000
d. 495,238

80. What is the loss on note receivable discounting?

a. 20,000
b. 13,000
c. 7,000
d. 0

(81-82)

On july 1, 2017, Jolly Company sold goods in exchange for P2,000,000, 8 month, noninterest-bearing note receivable.

At the time of the sale, the note’s market rate of interest was 12%. The note was discounted at 10% on September 1, 2017.

81. What amount was received from the note receivable discounting?
a. 1,940,000
b. 1,938,00
c. 1,900,00
d. 1,880,000

82. What is the loss on note receivable discounting?

a. 100,000
b. 125,000
c. 25,000
d. 0

(83-84)

Tender Company accepted from a customer a P4,000,000, 90-day, 12% note date August 31, 2017.

On September 30, 2017, the entity discounted without recourse the note at 15%. However, the proceeds were not received
until October 1, 2017.
83. What amount was received from the note receivable discounting?
a. 4,017,000
b. 4,120,000
c. 4,103,000
d. 3,965,500

84. What amount should be reported as loss on note receivable discounting?

a. 17,000
b. 23,000
c. 40,000
d. 0

(85-86)

On June 30, 2017, Bosom Company discounted at the bank a customer’s P6,000,000, 6-month, 10% note receivable dated
April 30, 2017. The bank discounted the note at 12%
85. What amount should be reported as net proceeds from the discounted note receivable?
a. 5,640,000
b. 5,760,000
c. 6,048,000
d. 6,174,400

86. What is the loss on note receivable discounting?

a. 252,000
b. 152,000
c. 52,000
d. 48,000

On July 1, 2017, Karma Company sold equipment to a customer for P1,000,000. The entity accepted a 10% note receivable
for the entire sale price. This note is payable in two equal installments of P500,000 plus accrued interest on December 31,
2017 and December 31, 2018. On July 1, 2018, the entity discounted the note at a bank at an interest rate of 12%.

87. What is the amount received from the discounting of note receivable?
a. 484,000
b. 493,500
c. 503,500
d. 517,000

Apex Company accepted from a customer P1,000,000 face amount, 6month, 8% dated at the beginning of current year, On
the same date, Apex discounted the note with recourse at the bank at a 10% discount rate. The discounting is accounted for
as a secured borrowing.

88. What is the interest expense to be recognized on the date of discounting?

a. 50,000
b. 40,000
c. 52,000
d. 12,000

On November 1, 2017 Duress Company discounted with recourse at 10% a one-year, noninterest bearing, P2,050,000 note
receivable maturing on January 31, 2018. The discounting of the note receivable is accounted for as a conditional sale with
recognition of contingent liability.

89. What amount of contingent liability should be disclosed in the financial statements for 2017?
a. 2,050,000
b. 2,000,000
c. 2,033,333
d. 0

(90-92)

On August 1, 2017, Obstacle Company’s P5,000,000 one-year noninterest-bearing own note due July 31, 2018 was
discounted at the bank at 10.8%. the entity used straight line method of amortizing discount.

90. What is the carrying amount of the note payable on August 1, 2017?
a. 5,000,000
b. 4,460,000
c. 4,500,000
d. 4,320,000
91. What is the interest expense for 2017?
a. 540,000
b. 270,000
c. 225,000
d. 315,000

92. What is the carrying amount of the note payable on December 31, 2017?
a. 5,000,000
b. 4,775,000
c. 4,685,000
d. 5,315,000

Undaunted Company discounted its own P5,000,000 one-year note at a bank, at a discount rate of 12%, when the prime
rate was 10%.

93. In reporting the note in the statement of financial position prior to maturity, what rate should be used in recording interest
expense?
a. 10.0%
b. 10.7%
c. 12.0%
d. 13.6%

(94-97)

On April 1, 2017, Aljean Company discounted with recourse a 9-month,10% note dated January 1, 2017 with the 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, 2017, the maker dishonored the note receivable. The entity paid the bank the maturity value of the note plus
protest fee P50,000.

On December 31, 2017, the entity collected the dishonored note receivable in full plus 12% annual interest on the total
amount due.

94. What amount was received from the note receivable discounting on April 1, 2017?
a. 6,063,000
b. 6,450,000
c. 6,150,000
d. 5,963,000

95. What amount should be recognized as loos on note receivable discounting?

a. 450,000
b. 387,000
c. 87,000
d. 63,000

96. What is the total amount collected from customer on December 31, 2017?
a. 6,450,000
b. 6,500,000
c. 6,695,000
d. 6,662,500

97. If the discounting is secured borrowing, what is included in the journal entry to record the transaction?
a. Debit loss on note receivable discounting P87,000
b. Debit interest expense P87,000
c. Credit liability for note discounted P6,063,000
d. Credit interest income P63,000