8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

ACC 106 - P1 EXAMINATION, Part 2

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For straight problem just write the number. No units, no comma, no space, round
off to whole number if there is a decimal, no Peso or other denomination sign.
Example answer: 100000 or 123456. For loss, use negative sign. Example -500.
For MCQ, choose the best among the given choices.

For the month of December, the records of BMM Corporation show the following
information: How much are the gross sales in December? *

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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

120000

Why did the accountant cross-foot amounts in the worksheet? *

probably to get the adjusted balance of an account

because the amount cannot cross-foot the accountant

to get into the other side of the worksheet

because the accountant does not have a ruler to make a double-rule

On January 1, 20x1, BMM Co. received a 4-year, noninterest bearing note of

₱1,000,000 in exchange for land with carrying amount of ₱500,000. The note is
due on December 31, 20x4. The effective interest rate is 14%. How much is the
carrying amount of the note on the Dec. 31, 20x2 and what is the net effect of
the transaction in BMM Co.’s 20x1 profit or loss? *

674,971 769,467 82,891 174,971 94,496 (9,189)

Carrying
amount on
Dec. 31,
20x2
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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

Net effect in
20x1 P/L ;
Increase
(Decrease)

BMM Co. received the following note: The note is due in four equal annual
installments. The first installment is due one period from initial recognition. What
is the carrying amount of the note at the end of the second year? *

513758

BMM Company received a one-year non-interest-bearing note receivable. When

the note receivable was recorded, which of the following were debited or
credited? *

Interest Receivable Discount on Note Receivable

Yes

No

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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

The note is due in five equal annual installments. The first installment is due at
initial recognition. What is the carrying amount of the note at initial recognition
before any collection? *

626194

BMM Co. received the following note: The note is due in four equal annual
installments. The first installment is due one period from initial recognition. How
much is the balance of the unearned interest income (discount on note
receivable) at the end of the second year? *

86242
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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

On Jan. 2, 20x1, an entity sold a machine in which the receipt of the

consideration is deferred to May 1, 20x2. The total collection on May 1, 20x2 will
include both principal and interest. Assuming interest at a 10% rate, the initial
measurement of the receivable would be computed as the total collection
multiplied by what time value of money factor? *

Future value of annuity of 1

Future value of 1

Present value of annuity of 1

Present value of 1

A trial balance before adjustments included the following: If the estimate of

uncollectibles is made by taking 1% of net sales, the amount of the adjustment is
*

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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

4110

BMM Co. received the following note: The note is due in lump sum in five years’
time. What is the carrying amount of the note at the end of the second year? *

877430

An analysis and aging of accounts receivable of the BMM Company at December

31, 2002 showed the following: Compute for the net realizable value of the
accounts receivable of BMM Company at December 31, 2002. *

727200

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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

Which of the following best describes the concept of time value of money? *

interest is earned or incurred on debt instruments due to passage of time

interest is earned only on interest-bearing receivables

the amount debited to interest receivable is always equal to the interest income
recognized during the period

if no interest receivable is recognized, no interest income is also

At 30 September 2000, BMM Ltd. had a provision for doubtful debts of ₱37,000.
During the year ended 30 September 2001 the company wrote off debts totaling
₱18,000, and at the end of the year, it is decided that the provision for doubtful
debts should be ₱20,000. What should be included in the income statement for
bad and doubtful debts? *

₱35,000 debit

₱1,000 debit

₱38,000 debit

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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

₱1,000 credit

The note is due in four equal annual installments. The first installment is due one
period from initial recognition. What is the carrying amount of the note at initial
recognition? *

582742

A trial balance before adjustments included the following: If the estimate of

uncollectibles is made by taking 10% of gross account receivables, the amount of
the adjustment is *

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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

4540

What factor should you use for a ₱2,000 note receivable that is collectible in full
after five years? *

Present value of 1

Present value of an ordinary annuity of 1

Present value of an annuity due of 1

Any of these

During the year, BMM Company made an entry to write off a ₱4,000
uncollectible account. Before this entry was made, the balance in accounts
receivable was ₱80,000 and the balance in the allowance account was ₱4,500.
The net realizable value of accounts receivable after the write-off entry was *

75500

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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

On July 1, 2002, BMM Corp. received a one-year note with a face value of
₱900,000 and a stated interest rate of 15 percent in exchange for a machine
with a fair value of ₱1,000,000. What is the effective interest rate on the note? *

16.67 percent

15.0 percent

3.5 percent

11.11 percent

According to the PFRSs, receivables (with allowed practical expedient for trade
receivables) are initially recognized at *

fair value

present value

cost

fair value plus transaction costs.

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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

On January 2, 20x3, BMM Co. sold equipment with a carrying amount of

₱480,000 in exchange for a ₱600,000 noninterest bearing note due January 2,
20X6. There was no established exchange price for the equipment. The
prevailing rate of interest for a note of this type at January 2, 20x3 was 10%. In
BMM' 20x3 income statement, what amount should be reported as interest
income? *

45000

Under the allowance method of recognizing bad debts on trade accounts

receivable, the effect of writing off an account to an entity's working capital is *

increase

decrease

either a or b depending on the current level of the entity's working capital

no effect

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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

Which of the following is true regarding non-interest bearing note receivables? *

they are always discounted to their present value on initial recognition

they include a specified principal amount but an unspecified interest amount

they include a specified principal and specified interest

they cause no interest income to be recognized over their term

they include an unspecified principal and an unspecified interest

The following information is available for BMM Company: It has been determined
that an allowance for doubtful accounts of ₱9,500 is needed at December 31,
2004. What amount should BMM record as "bad debt expense" for the year
ended December 31, 2004? *

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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

10500

On January 1, 20x1, BMM Co. sold transportation equipment with a historical cost
of ₱12,000,000 and accumulated depreciation of ₱7,000,000 in exchange for
cash of ₱100,000 and a noninterest-bearing note receivable of ₱4,000,000 due
in 4 equal annual installments starting on January 1, 20x1 and every January 1
thereafter. The prevailing rate of interest for this type of note is 12%. How much
is the interest income in 20x1? *

288220

BMM Co. has been recognizing bad debt expenses based on the direct write-off
method. In 20x4, How much is the doubtful accounts expense to be recognized
in 20x4? *

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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

34000

The note is due in lump sum in five years’ time. What is the carrying amount of
the note at initial recognition? *

415495

On July 1, 2010, a company obtained a two-year 8% note receivable for services

rendered. At that time, the market rate of interest was 10%. The face amount of
the note and the entire amount of the interest are due on June 30, 2012. Interest
receivable at December 31, 2010, was *

5% of the face value of the note.

4% of the face value of the note

5% of the July 1, 2010 present value of the amount due on June 30, 2012.

4% f th J l 1 2010 t l f th td
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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2
4% of the July 1, 2010 present value of the amount due on June 30, 2012.

At the close of its first year of operations, December 31, 2004, BMM Company
had accounts receivable of ₱490,000, after deducting the related allowance for
doubtful accounts. During 2004, the company had charges to bad debt expense
of ₱90,000 and wrote off, as uncollectible, accounts receivable of ₱40,000.
What should the company report on its balance sheet at December 31, 2004 as
accounts receivable before the allowance for doubtful accounts? *

540000

On January 1, 20x1, BMM Co. sold transportation equipment with a historical cost
of ₱12,000,000 and accumulated depreciation of ₱7,000,000 in exchange for
cash of ₱100,000 and a noninterest-bearing note receivable of ₱4,000,000 due
in 4 equal annual installments starting on January 1, 20x1 and every January 1
thereafter. The prevailing rate of interest for this type of note is 12%. How much
is the carrying amount of the receivable on December 31, 20x1? *

1,690,510

892,857

2 90 0 1
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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2
2,690,051

1,594,388

The overdraft per bank statement of BMM Co. was ₱36,088 as of March 31, 20x1.
The following information was gathered. How much is the overdraft per BMM’s
cashbook on March 31, 20x1? *

33670

Which of the following statements is incorrect regarding the initial recognition of

receivables? *

On initial recognition, the fair value of a short-term receivable may be equal to its face
amount.

On initial recognition, the fair value of a long-term receivable bearing a reasonable

interest rate is deemed equal to its face amount.

On initial recognition, the fair value of a long-term noninterest bearing receivable is

deemed equal to the present value of future cash flows from the instrument
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8/27/2021 ACC 106 - P1 EXAMINATION, Part 2

discounted at the effective interest rate on initial recognition.

On initial recognition, the fair value of all interest-bearing receivables is deemed equal
to their face amount.

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