A3 Quiz 3 Midterms PDF

10/28/21, 1:15 PM Quiz on Receivables Part II - Discounting of Notes Receivable; Loan Impairments: 1ST 21-22 Acctg 3 Intermediate Accounting 1
Quiz on Receivables Part II - Discounting of Notes

Receivable; Loan Impairments
Due No due date Points 50 Questions 50
Available until Oct 24 at 11:59pm Time Limit 150 Minutes
Instructions
Directions: Read each question carefully and choose the BEST answer. Your response to each
question is FINAL because there will be NO BACKWARD NAVIGATION. This means that you will
have NO ability to GO BACK to a specific question once you skipped or answered it.
This quiz was locked Oct 24 at 11:59pm.
Attempt History
Attempt Time Score
LATEST Attempt 1 132 minutes 41 out of 50
Score for this quiz: 41 out of 50

Submitted Oct 22 at 6:29pm
This attempt took 132 minutes.
Question 1 1 / 1 pts
An entity uses the installment method to recognize revenue from

installment sales. Customers pay the installment notes in 24 equal
monthly amounts which include 12% interest. What is the installment
notes receivable balance six months after the sale?
75% of the original sales price
https://canvas.instructure.com/courses/3240243/quizzes/9317727 1/34
Less than the present value of the remaining monthly payments

discounted at 12%
Correct!
The present value of the remaining monthly payments discounted at 12%
Less than 75% of the original sales price
If receivables are hypothecated against borrowings, the amount of

receivables involved should be:
Correct!
Disclosed in the notes
Excluded from the total receivables with disclosure
Excluded from the total receivables and a gain or loss is recognized

between the face amount and the amount of borrowings.
Excluded from the total receivables with no disclosure
Accounting for the interest in a noninterest-bearing note receivable is an

example of what aspect of accounting theory?
form over substance
matching
verifiability
Correct! substance over form
Note receivable discounted with recourse should be
included in total receivables with disclosure of the contingent liability
included in total receivables without disclosure of the contingent liability
Correct!
excluded from total receivables with disclosure of the contingent liability
excluded from total receivable without disclosure of the contingent liability
What is imputed interest?
Interest based on the stated interest rate
Interest based on the average interest rate
Correct! Interest based on the implicit interest rate
Interest based on the bank prime interest rate
A 90-day 15 % interest-bearing note receivable is sold to a bank without

recourse after being held for 60 days. The proceeds are calculated using
a 12 % interest rate. The amount credited to note receivable at the date of
the discounting transaction would be
the same as the cash proceeds
the maturity value of the note
less than the face value of the note
Correct!
the face value of the note
In calculating the carrying amount of a loan receivable, the leader adds to

the principal
Correct!
Direct loan origination cost incurred by the lender
Loan origination fee charged to the borrower
Interest incurred by the borrower
Indirect loan origination cost incurred by the lender.
An entity received a seven-year zero interest-bearing note on February

15, 2025 in exchange for property sold. There is no established exchange
price for the property and the note has no ready market. The prevailing
rate of interest for a note of this type was 7% on February 1, 2025, 6% on
December 31, 2025, 8% on February 1, 2026, and 9% on December 31,
2026. What interest rate should be used to calculate the interest revenue
from the transaction for the years ended December 31, 2025 and 2026,
respectively?
7% and 9%
0% and 0%
6% and 9%
Correct!
7% and 7%
A note receivable bearing a reasonable interest rate is sold to a bank with

recourse. The note receivable discounted account was appropriately
credited. The note receivable discounted account should be reported as
liability account for the face of the note
Correct!
contra asset account for the face amount of the note
liability account for the proceeds from the discounting transaction
contra asset account for the proceeds from the discounting transaction
Blink Co. factored P 750,000 of accounts receivable to Sparkle Co. on

December 3, 2026. Sparkle accepted the receivables, assessed a fee of 2
% and retains a holdback equal to 4 % of the accounts receivable. In
addition, Sparkle charged 12 % interest compounded on a weighted
average time to maturity of the receivables of 51 days. The fair value of
the recourse obligation is P 15,000.
Assuming all receivables are collected, the interest cost amounted to
P 12,350
P 12,375
not given
Correct!
P 12,575
Pink Co. has an 8 % note receivable dated June 30, 2024, in the original
amount of P 600,000. Payments of P 200,000 in principal plus accrued
interest are due annually on July 1, 2025, 2026, and 2027.
In its June 30, 2026 statement of financial position, what amount should
Pink report as a current asset for interest on the note receivable?
P 16,000
Correct!
P 32,000
P 48,000
P0
On May 1, 2026, Pager Co. bought a parcel of land for P 300,000. After
seven months, Pager sold this land to a triple-A rated company for P
450,000 under the following terms: 25 % at closing and a first mortgage
note (at the market rate of interest) for the balance. The first payment on
the note, plus accrued interest is due December 1, 2027. Pager reported
this sale on the installment basis in its 2026 tax return.
How much gain should Pager report from the sale of this land in its 2026
income statement?
Correct! P 150,000
P 112,500
P 37,500
P0
On November 1, 2023, Davis Company discounted with recourse at 10%

a one year, noninterest bearing, P4,000,000 note receivable maturing on
January 31, 2024. The discounting of the note receivable is accounted for
as a conditional sale with recognition of a contingent liability.
What amount of contingent liability for this note must be disclosed in the
financial statements for the year ended December 31, 2023?
P3,600,000
P4,400,000
Correct! P4,000,000
P0
On August 1, 2025, Sunflower Company discounted with recourse a

customer’s note at its bank at discount rate of 15%. The note was
received from customer on August 1, 2025, is for 90 days, has a face
value of P5,000,000, and carries an interest rate of 12%.The discounting
transaction is accounted for as secured borrowing.
The customer paid the note to the bank on October 30, 2025, the date of
maturity.
If the discount is accounted for as a secured borrowing, what is the

interest expense to be recognized on August 31, 2025?
P21,250
P25,000
P50,000
Correct! P28,750
On June 1, 2026, Pants Co. loaned to Shorts Co. P 500,000 on 12 %

note, payable in five annual installments of P 100,000 beginning January
2, 2027. In connection with this loan, Shorts was required to deposit P
5,000 in a non-interest bearing escrow account. The amount held in
escrow is to be returned to Shorts after all principal and interest payments
have been made. Interest on the note is payable on the first day of each
month beginning July 1, 2026, Shorts made timely payments through
November 1, 2026. On January 2, 2027, Pants received payment of the
first principal installments plus all interest due.
How much would be Pants’ interest receivable on the loan to Shorts at

December 31, 2026?
orrect Answer P 10,000
P 15,000
ou Answered P0
P 5,000
Link Co. factored P 600,000 of accounts receivable to Spink Co. on July

1, 2026. Control was surrendered by Link. Spink accepted the receivables
subject to recourse for non-payment. Spink assessed a fee of 2 % and
retains a holdback equal to 5 % of the accounts receivable. The fair value
of the recourse obligation is P 12,000.
What amount of loss on factoring should Link recognize?
ou Answered P 12,000
P 42,000
P0
On June 1, 2026, Hero Co. assigned P 400,000 of accounts receivable to

Halo Co. as a security for a loan of P 335,000. Hero charged a 2 %
commission on the amount of the loan; the interest rate on the note was
10 %. During the first month, Hero collected P 110,000 on assigned
accounts after deducting P 380 of discounts. Hero accepted returns worth
P 1,350 and wrote off assigned accounts totaling P 2,980.
How much cash did Hero receive from Halo at the time of the transfer?
P 335,000
P 301,500
P 327,000
Correct!
P 328,300
On June 1, 2026, Hero Co. assigned P 400,000 of accounts receivable to

Halo Co. as a security for a loan of P 335,000. Hero charged a 2 %
commission on the amount of the loan; the interest rate on the note was
10 %. During the first month, Hero collected P 110,000 on assigned
accounts after deducting P 380 of discounts. Hero accepted returns worth
P 1,350 and wrote off assigned accounts totaling P 2,980.
How much is the carrying value of the account receivable assigned as of

June 30, 2026?
P290,000
Correct!
P285,290
P289,620
P0
On December 1, 2026, M & M Co. assigned on a non-notification basis

accounts receivable of P 3,000,000 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 of the loan is 12 % per annum. The company
collected assigned accounts of P 2,000,000 and remitted the collections
to the bank in partial payment for 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 of the loan.
The payment applicable to the principal amounted to
P 2,024,000
P 2,000,000
Correct!
P 1,976,000
not given
On December 1, 2026, M & M Co. assigned on a non-notification basis

accounts receivable of P 3,000,000 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 of the loan is 12 % per annum. The company
collected assigned accounts of P 2,000,000 and remitted the collections
to the bank in partial payment for 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 of the loan.
In its December 31, 2026 statement of financial position, what amount of

note payable should M & M report as current liability?
P 1,024,000
P0
Correct! P 424,000
P 400,000
On October 31, 2026, Bundle Co. engaged in the following transactions:
Obtained a P 500,000 six-month loan from City Bank, discounted at

12 %. The company pledged P 500,000 of accounts receivable as
security for the loan.
Factored P 1,000,000 of accounts receivable without recourse on a

non-notification basis with Help Co. Help charged a factoring fee of 2
% of the amount of receivables factored and withheld 10 % of the
amount factored.
What is the total cash received from pledging the receivables?
Correct!
P 470,000
not given
480,000
P 50,0000
Mills Co. factored P 800,000 of accounts receivable to Boon Co. on July

1, 2026. Mills surrendered control. Boon accepted the accounts
receivable subject to recourse for non-payment. Boon assessed a fee of 2
addition, Boon charged 15 % interest computed on a weighted average
time to maturity of the receivables of 41 days. The fair value of the
recourse obligation is P 16,000.
What is the amount of cash received from the factoring?
P 714,520
P 770,520
Correct! P 730,520
P 754,520

Correct! P 40,000
P 100,000
P0
P 90,000

What is the cost of factoring?
P 85,480
P 69,480
On February 1, 2026, New York Co. factored receivables with a carrying

amount of P 2,000,000 to Chicago Co. New York assesses a finance
charge of 3 % of the receivables and retains 5 % of the receivables.
Assume that New York factors the receivables on a recourse basis. The
recourse obligation has a fair value of P 30,000. The loss to be reported
should be
P 150,000
P 60,000
Correct! P 90,000
P 120,000
On February 1, 2026, New York Co. factored receivables with a carrying

amount of P 2,000,000 to Chicago Co. New York assesses a finance
charge of 3 % of the receivables and retains 5 % of the receivables.
Relative to this transaction, you are to determine the amount of loss on

sale to be reported in the income statement of New York Co. for February.
P 100,000
Correct!
P 60,000
P0
P 160,000
Freelance Factors provides financing to other companies by purchasing

their accounts receivable on a non-recourse basis. Freelance charges a
commission to its clients of 15 % of all receivables factored. In addition,
Freelance withholds 10 % of receivables factored as protection against
sales returns or other adjustments. Freelance credits the 10 % withheld to
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. Freelance recognizes its 15 % commission as
revenue at the time receivables are factored. Also, experience has led
Freelance to establish an Allowance for Bad Debts of 4 % of all
receivables purchased.
On January 2, 2026, Freelance purchased receivables from Committed

Co. totaling P 1,500,000. Committed had previously established an
Allowance for Bad Debts for these receivables of P 35,000. By January
31, Freelance had collected P 1,200,000 on these receivables.
What amount of loss on factoring should Committed Co. recognize on the

sale of its receivables?
Correct! P 190,000
P 225,000
P 150,000
P0
Freelance Factors provides financing to other companies by purchasing

their accounts receivable on a non-recourse basis. Freelance charges a
commission to its clients of 15 % of all receivables factored. In addition,
Freelance withholds 10 % of receivables factored as protection against
sales returns or other adjustments. Freelance credits the 10 % withheld to
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. Freelance recognizes its 15 % commission as
revenue at the time receivables are factored. Also, experience has led
Freelance to establish an Allowance for Bad Debts of 4 % of all
receivables purchased.
On January 2, 2026, Freelance purchased receivables from Committed

Co. totaling P 1,500,000. Committed had previously established an
Allowance for Bad Debts for these receivables of P 35,000. By January

31, Freelance had collected P 1,200,000 on these receivables.
What is the adjusted balance of the accounts receivable from factor as of

January 31, 2026?
P0
P 120,000
Bruno received from a customer a one-year, P 375,000 note bearing

annual interest of 8 %. After holding the note for six months, Bruno
discounted the note at Super Bank at an effective interest rate of 10 %.
How much did Bruno receive from the bank?
P 405,000.00
P 371,428.50
P 392,857.50
Correct! P 384,750.00
Bruno received from a customer a one-year, P 375,000 note bearing

If the discounting is treated as a borrowing, what amount of loss on

discounting should Bruno recognize?
P 9,750
ou Answered P 5,250
P 20,250
orrect Answer P0
. Bruno received from a customer a one-year, P 375,000 note bearing

If the discounting is treated as a sale, what amount of loss on discounting

should Bruno recognize?
P0
P 9,750
P 20,250
Correct! P 5,250
Warner Co. accepted from a customer a P 400,000, 90-day, 12 %

interest-bearing note dated August 31, 2026. On September 30, 2026,
Warner discounted the note at Mega Bank at 15 %. However, the
proceeds were not received until October 1, 2026.
In Warner’s September 30, 2026 statement of financial position, the

amount receivable from the bank, based on a 360-day year, includes net
revenue of
P 3,000
P 2,000
P 4,000
Correct! P 1,700
Sad Co, accepted a P 200,000, 90-day, 12 % interest-bearing note dated

September 15, 2026 from a customer. On October 15, 2026, Sad
discounted the note at PNB at 15 % discount rate. The customer did not
pay the note at maturity and as a result PNB charged Sad Co. for P 2,000
as protest fee.
Based on a 360-day year, what amount should Sad report as net revenue
from this transaction?
P 2,000
orrect Answer P 850
ou Answered P 1,500
P 1,000
Sad Co, accepted a P 200,000, 90-day, 12 % interest-bearing note dated

September 15, 2026 from a customer. On October 15, 2026, Sad
discounted the note at PNB at 15 % discount rate. The customer did not
pay the note at maturity and as a result PNB charged Sad Co. for P 2,000
as protest fee.
Assuming a 360-day year and the method of discounting is treated as a

sale with recourse, by how much Sad Co. will pay PNB?
P0
P 206,000
XYZ Co. factored P 6,000,000 of accounts receivable to ABC Co. on

October 1, 2026. Control was surrendered by XYZ. ABC accepted the
receivables subject to recourse for nonpayment. ABC assessed a fee of 3
addition, ABC charged 15 % interest computed on a weighted-average
XYZ will receive and record cash of
P 5,476,850
P 5,296,850
Correct! P 5,386,850
P 5,556,850
XYZ Co. factored P 6,000,000 of accounts receivable to ABC Co. on

October 1, 2026. Control was surrendered by XYZ. ABC accepted the
receivables subject to recourse for nonpayment. ABC assessed a fee of 3
addition, ABC charged 15 % interest computed on a weighted-average
Assuming all receivables are collected, XYZ’s cost of factoring the

receivables would be
P 613,150
P 433,150
Apex Co. accepted from a customer P 1,000,000 face amount, 6-month, 8

% noted dated April 15, 2026. On the same date, Apex discounted the
note at Union Bank at a 10 % discount rate. How much cash should Apex
receive from the bank on April 15, 2026?
P 990,000
P 972,000
P 1,040,000
Correct! P 988,000
Apex Co. accepted from a customer P 1,000,000 face amount, 6-month, 8

% noted dated April 15, 2026. On the same date, Apex discounted the
note at Union Bank at a 10 % discount rate.
What is the loss on note receivable discounting?
P52,000
Correct!
P12,000
P50,000
P40,000
On June 30, 2026, Ray Co. discounted at the bank a customer’s P

6,000,000, 6-month, 10 % note receivable dated April 30, 2026. The bank
discounted the note at 12 %. Ray’s proceeds from this discounted note
amounted to
P 6,174,000
P 5,640,000
P 5,760,000
On June 30, 2026, Ray Co. discounted at the bank a customer’s P

6,000,000, 6-month, 10 % note receivable dated April 30, 2026. The bank
discounted the note at 12 %.
What is the loss on note receivable discounting?
P48,000
Correct!
P52,000
P152,000
P252,000
On January 1, 2026, Ott Co. sold goods to Fox Co. Fox signed a
noninterest-bearing note requiring payment of P 600,000 annually for
seven years. The first payment was made on January 1, 2026. The
prevailing rate of interest for this type of note at date of issuance was 10
%. Information on present value factors is as follows:
Present value of
Present value
Period ordinary annuity
of 1 at 10 %
of 1 at 10 %
6 0.56 4.36
7 0.51 4.87
Ott should record sales revenue in January 2026 of
Correct!
P 3,216,000
P 2,616,000
P 2,142,000
P 2,922,000
Present value of
Present value
of 1 at 10 %
of 1 at 10 %
6 0.56 4.36
7 0.51 4.87
What is the carrying amount of the note receivable on January 1, 2026?
P 3,600,000
P 2,322,000
P 3,216,000
Correct!
P 2,616,000
Present value of
Present value
of 1 at 10 %
of 1 at 10 %
6 0.56 4.36
7 0.51 4.87
How much should be credited to unearned interest income on January 1,

2026?
P 600,000
Correct! P 984,000
P 965,000
P 722,400
Period Present value Present value of

of 1 at 10 % ordinary annuity
of 1 at 10 %
6 0.56 4.36
7 0.51 4.87
What is the interest income for 2026?
Correct! P261,600
P232,200
P360,000
P300,000
Present value of
Present value
of 1 at 10 %
of 1 at 10 %
6 0.56 4.36
7 0.51 4.87
What is the carrying amount of the notes receivable on December 31,

2026?
P2,277,600
Correct!
P2,877,600
P3,000,000
P3,600,000
National Bank grants a 10-year loan to Abbo Co. in the amount of P

1,500,000 with a stated interest rate of 6 %. Payments are due monthly
and are computed to be P 16,650. National Bank incurs P 40,000 of direct
loan origination cost and P 20,000 of indirect loan origination cost. In
addition, National Bank charges Abbo a 4 % nonrefundable loan
origination fee.
National Bank, the lender, has a carrying amount of
P 1,520,000
P 1,440,000
P 1,500,000
National Bank grants a 10-year loan to Abbo Co. in the amount of P

1,500,000 with a stated interest rate of 6 %. Payments are due monthly
and are computed to be P 16,650. National Bank incurs P 40,000 of direct
loan origination cost and P 20,000 of indirect loan origination cost. In
addition, National Bank charges Abbo a 4 % nonrefundable loan
origination fee.
Abbo, the borrower, has a carrying amount of
P 1,500,000
Correct!
P 1,440,000
P 1,480,000
P 1,520,000
Buswang Beach Bank loaned Boracay Co. P 7,500,000 on January 1,

2024. The terms of the loan were payment in full on January 1, 2029 plus
annual interest payment at 11 %. The interest payment was made as
scheduled on January 1, 2025, However, due to financial setbacks,
Boracay was unable to make its 2026 interest payment. Buswang Beach
considers the loan impaired and projects the cash flows from the loan as
of December 31, 2026. Assume that the bank accrued the interest at
December 31, 2025, but did not continue to accrue interest due to the
impairment of the loan. The projected cash flows are:
Date of cash flow Amount projected

as of December 31,
2026
December 31, 2027 P 500,000
December 31, 2028 1,000,000
December 31, 2029 2,000,000
December 31, 2030 4,000,000
The present value of 1 at 11 % is as follows:
For one period 0.9
For two periods 0.81
For three periods 0.73
For four periods 0.66
How much is the loan impairment loss on December 31, 2026?
P 5,360,000
P 2,140,000
P 2,240,000

Amount projected
Date of cash flow as of December 31,
2026
December 31, 2027 P 500,000
December 31, 2028 1,000,000
December 31, 2029 2,000,000
December 31, 2030 4,000,000
For one period 0.9
What is the interest income to be reported by Buswang Beach in 2027?
P 599,456
P 825,000
P 534,600
Correct! P 589,600

Amount projected
Date of cash flow as of December 31,
2026
December 31, 2027 P 500,000
December 31, 2028 1,000,000
December 31, 2029 2,000,000
December 31, 2030 4,000,000
For one period 0.9
How much is the present value of the loan as of December 31, 2026?
orrect Answer P 5,360,000
ou Answered P 2,140,000
P 2,965,000
P 2,240,000
Quiz Score: 41 out of 50

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10/28/21, 1:15 PM Quiz on Receivables Part II - Discounting of Notes Receivable; Loan Impairments: 1ST 21-22 Acctg 3 Intermediate Accounting 1

Quiz on Receivables Part II - Discounting of Notes

This quiz was locked Oct 24 at 11:59pm.

Score for this quiz: 41 out of 50

An entity uses the installment method to recognize revenue from

75% of the original sales price

Less than the present value of the remaining monthly payments

The present value of the remaining monthly payments discounted at 12%

Less than 75% of the original sales price

If receivables are hypothecated against borrowings, the amount of

Excluded from the total receivables with disclosure

Excluded from the total receivables and a gain or loss is recognized

Excluded from the total receivables with no disclosure

Accounting for the interest in a noninterest-bearing note receivable is an

form over substance

Correct! substance over form

Note receivable discounted with recourse should be

included in total receivables with disclosure of the contingent liability

included in total receivables without disclosure of the contingent liability

excluded from total receivables with disclosure of the contingent liability

excluded from total receivable without disclosure of the contingent liability

What is imputed interest?

Interest based on the stated interest rate

Interest based on the average interest rate

Correct! Interest based on the implicit interest rate

Interest based on the bank prime interest rate

A 90-day 15 % interest-bearing note receivable is sold to a bank without

the same as the cash proceeds

the maturity value of the note

less than the face value of the note

In calculating the carrying amount of a loan receivable, the leader adds to

Loan origination fee charged to the borrower

Interest incurred by the borrower

Indirect loan origination cost incurred by the lender.

An entity received a seven-year zero interest-bearing note on February

A note receivable bearing a reasonable interest rate is sold to a bank with

liability account for the face of the note

liability account for the proceeds from the discounting transaction

Blink Co. factored P 750,000 of accounts receivable to Sparkle Co. on

Assuming all receivables are collected, the interest cost amounted to

On November 1, 2023, Davis Company discounted with recourse at 10%

On August 1, 2025, Sunflower Company discounted with recourse a

If the discount is accounted for as a secured borrowing, what is the

On June 1, 2026, Pants Co. loaned to Shorts Co. P 500,000 on 12 %

How much would be Pants’ interest receivable on the loan to Shorts at

orrect Answer P 10,000

Link Co. factored P 600,000 of accounts receivable to Spink Co. on July

What amount of loss on factoring should Link recognize?

orrect Answer P 24,000

On June 1, 2026, Hero Co. assigned P 400,000 of accounts receivable to

On June 1, 2026, Hero Co. assigned P 400,000 of accounts receivable to

How much is the carrying value of the account receivable assigned as of

On December 1, 2026, M & M Co. assigned on a non-notification basis

The payment applicable to the principal amounted to

On December 1, 2026, M & M Co. assigned on a non-notification basis

In its December 31, 2026 statement of financial position, what amount of

On October 31, 2026, Bundle Co. engaged in the following transactions:

Obtained a P 500,000 six-month loan from City Bank, discounted at

Factored P 1,000,000 of accounts receivable without recourse on a

What is the total cash received from pledging the receivables?

Mills Co. factored P 800,000 of accounts receivable to Boon Co. on July

What is the amount of cash received from the factoring?

Mills Co. factored P 800,000 of accounts receivable to Boon Co. on July