Ar LR NR

1. Magic Co. purchased from Howard Co.
a 20,000, 8% five-year note that required five

equal annual year end payments of P5,009. The note was discounted to yield a 9% rate
to Magic. At the date of purchase, Magic recorded the note at its present value of
P19,485.What should be the total interest revenue earned by Magic over the life of this
note?
a. P5.045 c. P8,000
b. P5,560 d. P9,000
2. Lakers Company provides financing to other companies by purchasing their accounts
receivable a non-recourse basis. Lakers charge its clients a commission of P15% on all
receivables factored. In addition, Lakers withholds 10% of receivables factored as
protection against sales returns or other adjustment. Experience has led Lakers to
establish an allowance for bad debts of 4% of all receivables purchased.
On January 15, Lakers purchased receivables from Kobe totaling P 1,500,000. Kobe had
previously an allowance for bad debts for these receivables at P35,000. By January 31,
Lakers had collected P1,200,000 on these receivabes. What is the loss on factoring to be
recognized by Kobe Company?
a. P 190,000 c. P 225,000
b. P375,000 d. P 0
3. On January 1,2011, Hawks Company sold a special machine that had a list price of
P900,000. The buyer paid P 100,000 cash and signed an P800,000 note. The note
specified that it would be paid off four equal annual payments of P274,565 each starting
on December 31,2011. The carrying amount of the receivable on December 31,2011 is
a. P525,435 c. P701,435
b. P637,435 d. 725,435
4. BART Company started operations on January 01, 2008. The following are available as of
June 30, 2008:
Purchase of merchandise P 450,000
Inventory, June 30, 2008 75,000
Goods were sold at 50% above cost; 75% ofsales were on account
Estimated bad debts 1% of credit sales
Collections from charge customers 315,000
Allowance for doubtful accounts, June 30,2008
after write off of uncollectible accounts
3,903.75
The outstanding accounts receivable as of June 30, 2008 were:

a.P110,000 b.P106,875 c.P106,560 d.P285,000
6. PRIME Co. received from a customer a one year, P500,000 note bearing annual interest of 8%.
After holding the note for six months, PRIME discounted the note at Asian Bank at an effective
interest rate of 10%.
At the date of discounting, PRIME should recognize
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a. P 40,000 interest revenue b. P23,810 interest revenue
c. P13,000 interest revenue d. P 4,762 interest expense
Use the following information for questions 8 to 9.

The balance sheet for the Dixie Corporation on December 31, 2007 includes the following
receivables balances:
Notes Receivable P365,000

Less notes discounted 155,000 P210,000
Accounts Receivable P856,000
Less allowance for doubtful accounts 41,500 814,500
Selected ransactions during 2008 included the following:

a. Notes received in settlement of accounts totaled P825,000.
b. Notes receivable discounted as of December 31, 2007, were paid at maturity with the
exception of one P30,000 note on which the company had to pay the bank P30,900,
which included interest and protest fees. It is expected that recovery will be made on
this note early 2009.
c. Customers’ notes of P600,000 were discounted with recourse during the year, proceeds
from their transfer being P585,000. Of this total, P480,000 matured during the year
without notice of protest.
h. Notes receivable collected during the year totaled P270,000 and interest collected was
P24,500.
Determine the adjusted balances of the following accounts as of December 31, 2008:
8. Notes Receivable (including notes receivable discounted).
a. P320,000 b. P365,000 c. P165,000 d. P285,000
9. Notes Receivable Discounted
a. P155,000 b. P600,000 c. P120,000 d. P105,000
1. Julia Bakery estimates the allowance for uncollectible accounts at 3% of the ending
balance of accounts receivable. During 2014, Julia‘s credit sales and collections were P125,000
and P131,000 , respectively. What was the balance of the accounts receivable on January 1,
2014, P180 in accounts receivable were written off during 2014 and if the allowance for
doubtful account had a balance of P 750 on 12/31/2014? Ans. P31,180
2. Helter Skelter Corp. estimates bad debts expense at ½% of credit sales. The company
recorded accounts receivable and allowance for doubtful accounts of P471,000 and P1,650
respectively, at December 31, 2013. During 2014, Helter’s credit sales and collections were
P315,000 and P 319,000 respectively , and P 1,720 in accounts receivable were written off.
Helter’s accounts receivable at December 31, 2014 are: Ans. P465,280
3. Kevin Company had the following information relation to its accounts receivable:
Accounts receivable, 12/31/2013 P 1,300,000
Credit sales for 2014 5,400,000
Collections from customers for 2014, excluding recovery 4,750,000
Accounts written off 9/30/2014 125,000
Collections of accounts written off in prior year
Customer credit was not reestablished 25,000
Estimated uncollectible accounts receivables per aging
Of receivables at 12/31/2014 165,000
On December 31,2014 the amortized cost of accounts receivable:

Ans. P1,660,000
3.On January 1, 2011, Kaye company sold equipment with a carrying amount of P 700,000 to
Kyla Company. As payment Kyla gave Kaye Company a P1,000,000 note. The note bears an
interest rate of 5% and is to be repaid in five annual installments of P200,000 plus interest on
the outstanding balance. The first payment was received on December 31, 2011. The market
price of the equipment is not reliably determinable. The prevailing rate of interest for notes of
the type is 10%.
The interest income to be recognized in 2014 is
Ans. P37,355
4. On August 1, Southeast Corporation assigned P 20,000 of its P56,000 accounts

receivable. The finance company advanced 90% of the assigned accounts less a P2,000.00 fee.
Interest is 12% and payable monthly on the beginning of the period balance. A loan payment is
remitted at the end of each month. Each payment includes a principal and Interest. The amount
of each loan payment equals the cash collected on receivables during the month plus interest
on the loan balance.
If P 8,000 was collected bon accounts receivable during August , the entry for the first loan
payment would include a
a. Debit interest expense of P180
b. Credit cash of P8,000
c. Credit accounts receivable assigned of P8,000
d. Debit to notes payable of P8,120
5. John Corp. has the following data relating to Accounts Receivable for the year ended
December 31, 2014:
Accounts Receivable, January 1, 2014 P480,000
Allowance for Doubtful Accounts,
January 1, 2014 19,200
Sales during the year, all on account,
terms 2/10, 1/15, n60 2,400,000
Cash Received from customers
during the year 2,560,000
Accounts written off during the year 17,600
An analysis of cash received from customers during the year revealed that P1,411,200 was
received from customers availing 10-day discount period, P792,000 from customers availing the
15-day discount period, P4,800 represented recovery of accounts written off, and the balance
was received from customers paying beyond the discount period.
The allowance for doubtful accounts is adjusted so that it represents a certain percentage of the
outstanding accounts receivable at year-end. The required percentage at December 31, 2014 is
125% of the rate used on December 31, 2013.
The Allowance for Doubtful Accounts as of December 31, 2014 should be

a. P15,360 c. P13,280
b. P13,520 d. P 7,120
6. On July 1, 2014, Sadanga Company finished consultation services and accepted in

exchange a promissory note with a face value of P300,000, due date June 30, 2017, 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 10%. Total income to be
recognized in Sadanga’s 2014 profit or loss is
a. P307,500 c. P275,829
b. P299,963 d. P262,694
1. Based on it past collection experience. Taipei Company provides for bad debts at the rate of 2%
of net credit sales. On January 1, 2011, the allowance for doubtful accounts credit balance was P
10,000. During 2011, Taipei wrote off P18,000 of uncollectible receivables and recovered P5,000
on accounts written off in prior years. If net credit sales for 2011 totaled P 1,000,000, the
doubtful account expense for 2011 should be
a. P 17,000 c. P 23,000
b. P 20,000 d. P 35,000
2. Bangkok Corporation sold a machine on July 1, 2011. The cash price of the machine is P
79,000.The buyer signed a deferred payment contract that provides for a down payment of P
10,000 and an 8-year note bearing interest at 10%. The note is to be paid in 8 equal annual
payments. The payments are made on June 30 of each year, beginning on June 30, 2012. The 8
equal annual payment is
a. P14,808 c. P13,462
P12,934 d. P11,75
3. On January 1, 2011, Athens Company sold equipment with a carrying amount of P 500,000 to
Greece Company. As payment, Greece gave Athens Company a P 800,000 note. The note bears
an interest rate of 6% and is to be repaid in four annual installments of P 200,000 ( plus interest
on the outstanding balance. The first payment was received on December 31 ,2011. The market
price of the of the equipment is not reliably determinable. The prevailing rate of interest for note
of this type is 12%. The total income to be recognized in 2011 profit or loss is
a. P 288,197 c. P 203,747
b. P251,747 d. P 348,000
4. Berlin Company sold a tract of land to Germany Co. on July 1, 2010, for P 8,000,000 under an
installment sale contract. Germany Co. signed a 4 year 11% note for P 5,600,000 on July 1, 2010,
in addition to the downpayment of P 2,400,000. The equal annual payments of principal and
interest on the note will be P 1,805,000 payable on July, 1, 2011, 2012, 2013 and 2014. The land
had an established cash price of P 8,000,000, and its cost to the company was P 6,000,000. The
collection of the installments on this note is reasonably assured. The current portion of the
installment note receivable on December 31,2011 is
a. P 1,805,000 c. P 1,319,700
b. P 1,400,000 d. P 1,189,000
5. On August 1, Buenos Aires Corporation assigned a P 20,000 of its P 56,000 of accounts
receivable. The finance Company advanced a 90% of the assigned accounts less a P 2,000 fee.
remitted at the end of each month. Each payment includes principal and interest. The amount of
each loan payment equals the cash collected on receivables during the month plus interest on
the loan balance. If P 8,000 was collected on accounts receivable during August, the entry for
the first loan payment would include a
a. Debit to interest expense of P 180
b. Credit to cash of P 8,000
c. Credit to accounts receivable assigned of P 8,000
d. Debit to notes payable of P 8,180
6. A firm factors P 40,000 of accounts receivable without recourse. The factor agrees to provide
financing based on these receivables, but imposes a 10% fee. In addition, the transferor and
transferee agree that P 3,000 of sales returns and allowance can be expected from these
accounts. What is the loss or expense to be recorded by the transferor?
a. P 7,000 c. P 3,000
b. P 4,000 d. P 0
7. On January 1, 2013, Merkel Corporation sold equipment for P 1,000,000. Merkel accepted a 10%
note receivable for the entire sales price. This note is payable in two equal annual installments of
P 500,000 plus interest on December 31, 2013 and December 31,2014. On July 1,2014, Mekel
discounted the note at bank at an interest rate of P 12% . Merkel’s proceeds from the discounted
note were
a. P 484,000 c. P 493,500
b. P 503,500 d. P 517,000
7. Julia Bakery estimates the allowance for uncollectible accounts at 3% of the ending
balance of accounts receivable. During 2014, Julia‘s credit sales and collections were P125,000
and P131,000 , respectively. What was the balance of the accounts receivable on January 1,
2014, P180 in accounts receivable were written off during 2014 and if the allowance for
doubtful account had a balance of P 750 on 12/31/2014? Ans. P31,180
8. Helter Skelter Corp. estimates bad debts expense at ½% of credit sales. The company
recorded accounts receivable and allowance for doubtful accounts of P471,000 and P1,650
respectively, at December 31, 2013. During 2014, Helter’s credit sales and collections were
P315,000 and P 319,000 respectively , and P 1,720 in accounts receivable were written off.
Helter’s accounts receivable at December 31, 2014 are: Ans. P465,280
9. Kevin Company had the following information relation to its accounts receivable:
Accounts receivable, 12/31/2013 P 1,300,000
Credit sales for 2014 5,400,000
Collections from customers for 2014, excluding recovery 4,750,000
Accounts written off 9/30/2014 125,000
Collections of accounts written off in prior year
Customer credit was not reestablished 25,000
Estimated uncollectible accounts receivables per aging
Of receivables at 12/31/2014 165,000
On December 31,2014 the amortized cost of accounts receivable:

Ans. P1,660,000
10. On January 1, 2011, Kaye company sold equipment with a carrying amount of P 700,000
to Kyla Company. As payment Kyla gave Kaye Company a P1,000,000 note. The note bears an
interest rate of 5% and is to be repaid in five annual installments of P200,000 plus interest on
the outstanding balance. The first payment was received on December 31, 2011. The market
price of the equipment is not reliably determinable. The prevailing rate of interest for notes of
the type is 10%.
The interest income to be recognized in 2014 is
Ans. P37,355
11. On August 1, Southeast Corporation assigned P 20,000 of its P56,000 accounts

receivable. The finance company advanced 90% of the assigned accounts less a P2,000.00 fee.
remitted at the end of each month. Each payment includes a principal and Interest. The amount
of each loan payment equals the cash collected on receivables during the month plus interest
on the loan balance.
If P 8,000 was collected bon accounts receivable during August , the entry for the first loan
payment would include a
e. Debit interest expense of P180
f. Credit cash of P8,000
g. Credit accounts receivable assigned of P8,000
h. Debit to notes payable of P8,120
12. John Corp. has the following data relating to Accounts Receivable for the year ended
December 31, 2014:
Accounts Receivable, January 1, 2014 P480,000
Allowance for Doubtful Accounts,
January 1, 2014 19,200
Sales during the year, all on account,
terms 2/10, 1/15, n60 2,400,000
Cash Received from customers
during the year 2,560,000
Accounts written off during the year 17,600
An analysis of cash received from customers during the year revealed that P1,411,200 was
received from customers availing 10-day discount period, P792,000 from customers availing the
15-day discount period, P4,800 represented recovery of accounts written off, and the balance
was received from customers paying beyond the discount period.
The allowance for doubtful accounts is adjusted so that it represents a certain percentage of the
outstanding accounts receivable at year-end. The required percentage at December 31, 2014 is
125% of the rate used on December 31, 2013.
The Allowance for Doubtful Accounts as of December 31, 2014 should be

c. P15,360 c. P13,280
d. P13,520 d. P 7,120
13. On July 1, 2014, Sadanga Company finished consultation services and accepted in
exchange a promissory note with a face value of P300,000, due date June 30, 2017, 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 10%. Total income to be
recognized in Sadanga’s 2014 profit or loss is
c. P307,500 c. P275,829
d. P299,963 d. P262,694
14. An entity factors its accounts receivable. The finance company requires an 8% reserve and
charge a 1.5% commission on the amount of the receivable. The remaining amount to be
advanced is further reduced by an anuual interest of 16%. What proceeds( rounded to the
nearest peso ) will eneterprise receive from the finance company at the a P110,000 account
is due in 60 days is turned over the finance company?
a. P 83,360 c. P 99,550
b. P 81,950 d. P 96,895
15. Based on its past collection expense, Taipei Company provides for bad debts at the rate of
2% of net credit sales. On January 1, 2011, the allowance for doubtful acccounts credit
balance was P 10,000. During 2011, Taipei wrote off P18,000 of uncollectible accounts and
recovered P 5,000 on accounts written off in prior years. If net credit bsales for 2011 totalled
P 1,000,000, the doubtful accounts expense for 2011 should be
a. P 17,000 c. P 23,000
b. P 20,000 d. P 35,000
16. Bangkok Corporation sold a machine on July 1, 2011. The cash price of the machine is
P79,000. The buyer signed a deferred payment contract that provides for a downpyment of
P10,000 and an an 8-year note bearing interest at 10%. The note is to be paid in 8 equal
annual payments. The payments are made on June 30 of each year, beginning June 30,2012.
The 8 equal annual payment is
a. P14,808 c. P13,462
b. P12,934 d. P11,758
17. On January 1, 2011, Athens Company sold equipment with a carrying amount of P500,000
to Greece Company. As payment, Greece gave Athens Company a P 800,000 note. The note
bears interesr rate of 6% and is to be paid in four annual installments of P 200,000 ( plus
interest on the outstanding balance). The first payment was received on December 31,
2011. The market price of the equipment is not reliably determinable. The prevailing rate of
interest for notes of this type is 12%. The total income to be recognized in 2011 profit or loss
is
a. P 288,197 c. P 203,747
b. P251,747 d. P348,000
18. Berlin Company sold a tract of land to Germany Co. On July 1, 2010, for P 8,000,000 under
an installment sale contract. Germany Co, signed a 4-year 11% note for P 5,600,000 on July
1, 2010, in addition to gthe down payment of P 2,400,000. The equal annual payments of
principal and intererst on the note will be P 1805,000 payable on July 1,2011, 2012, 2013,
2014. The land had an established cash price of P 8,000,0000, and its cost was P 6,000,000.
The collection of the nolte is reasinably assured. The current portion of the installment
accounts receivable on December 31, 2011 is
a. P 1,805,000 c. P 1,319,7000
b. P 1,400,000 d. P 1,189,000
19. A firm factors P 40,000 of accounts receivable without recourse. The Fractor agrees to
provide financing based on these receivables, but imposes a 10% fee. In addition, the
transferor and transferee agree that P 3,0000 of sales returns and allowances can be
expected from these accounts. What is the loss or expense to be recorded by ther
transferor?
a. P 7,000 c. P 3,000
b. P 4,000 d. P 0
20. On December 1, 2014, Tangle Mortgage Co. Gave Kelp Corp. A P 200,000 12% loan. Kelp
received proceeds of P194,000 after the reduction of P 6,000 non refundable loan
origination fee. Principal and interest are due in 60 monthly installments of P 4,450
beginning January 1, 2015. The repayments yeild an effective interest rate of P 12% at
present value of P 200,000 and 13.4% at a present value of P 194,000. What amount of
accrued interest receivable should Tangle include in its December 31, 2014, Statement of
financial position+
a. P 4,450 c. P 2,000
b. P 2,166 d. P 0
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1. Magic Co. purchased from Howard Co.

a 20,000, 8% five-year note that required five

The outstanding accounts receivable as of June 30, 2008 were:

Use the following information for questions 8 to 9.

Notes Receivable P365,000

Selected ransactions during 2008 included the following:

On December 31,2014 the amortized cost of accounts receivable:

4. On August 1, Southeast Corporation assigned P 20,000 of its P56,000 accounts

The Allowance for Doubtful Accounts as of December 31, 2014 should be

6. On July 1, 2014, Sadanga Company finished consultation services and accepted in

On December 31,2014 the amortized cost of accounts receivable:

11. On August 1, Southeast Corporation assigned P 20,000 of its P56,000 accounts

The Allowance for Doubtful Accounts as of December 31, 2014 should be

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