1/11/22, 7:19 PM Module 5 Quiz (Part 2): Attempt review

ACT142 Auditing and Assurance: Concepts and Applications 1 (TMS Pendang) SY 2021-
2022

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Dashboard / My courses / ACT142 TMSP 2021-2022 / ASSESSMENTS / Module 5 Quiz (Part 2)

Started on Tuesday, 11 January 2022, 5:53 PM

State Finished
Completed on Tuesday, 11 January 2022, 7:18 PM
Time taken 1 hour 24 mins
Grade 46.00 out of 50.00 (92%)

Question 1
Complete

Mark 2.00 out of 2.00

On January 1, 20x1, ABC Bank extended a 12%, 4-year, P4,000,000 loan to XYZ, Inc. ABC Bank incurred direct origination costs of P364,098.
ABC charged XYZ, Inc. 6% service charge. The effective interest rate on the loan is 11%. 

 On December 31, 20x2, ABC assesses that the loan is credit-impaired. All interests accruing on the loan are settled. However, ABC
Bank expects that future interests will not be collected. ABC Bank makes the ff. cash flow projections from the borrower: 
December 31, 20x3: P1,000,000

December 31, 20x4:    1,500,000

December 31, 20x5:    1,500,000

 The current prevailing interest rate is 12%.

How much is the carrying amount of the loan on December 31, 20x2 prior to adjustment for impairment? 

a. 3,762,699

b. 4,124,098

c. 4,068,501

d. 3,875,902

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Question 2
Complete

Mark 2.00 out of 2.00

On September 1, 2020, Indiana Co. accepted a P500,000, 5-month, 15% interest-bearing note from a customer for an accounts receivable
balance. On November 1, 2020, Indiana discounted the note, as a conditional sale, to Security Bank at 12%. The customer did not pay the
note at maturity. Protest fees amounted to P15,000. 

What is the amount should be debited to Notes Receivable Dishonored when the customer defaulted? 

Answer: 546250

Question 3
Complete

Mark 2.00 out of 2.00

On January 1, 2019, Zion Bank provided a loan of P4,000,000 to a XYZ Co. Under the loan agreement, the effective interest rate is 10% and
that XYZ Co. is to pay the annual interest every December 31. The principal amount of the loan is due on December 31, 2023. On December
31, 2019, the bank needs to measure the 12-month expected credit loss for the loan. The bank determined that the probability of the loan
being in default over the next 12 months is 1% and that 20% of the gross carrying amount will be lost over the term of the loan (Loss Given
Default is 20%). 

On December 31, 2020, the bank has determined that there is a significant increase in the credi risk of the loan receivable. The probability of
the loan being in default over the life of the loan is 10% and that 25% of the gross carrying amount will be lost over the remaining term of the
loan. 

During 2021, XYZ Company began to face financial difficulties. At year-end, the bank considered the loan to be impaired. Interest for that
year was collected. However, only 40% of the principal amount is expected to be received on due date. 

Amount of impairment loss to be recognized on December 31, 2020?

a. 93,270

b. 100,000

c. 156,470

d. 75,130

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Question 4
Complete

Mark 2.00 out of 2.00

Faithful Bank loaned P3,000,000 to a borrower on January 1, 2020. The loan bears 15% interest and is payable every December 31. The
principal is payable on December 31, 2024. The bank charged origination fees amounting to 300,000 and incurred direct origination costs of
P624,430. 

What is the effective interest rate on the loan?

a. 19%

b. 9%

c. 15%

d. 12%

Question 5
Complete

Mark 1.00 out of 1.00

Which of the following statements is correct concerning the use of negative confirmation requests?

a. Negative confirmation requests are effective when detection risk is low

b. Negative confirmation requests are effective when understatements of account balances are suspected

c. Unreturned negative confirmation requests indicate that alternative procedures are necessary.

d. Unreturned negative confirmation requests rarely provide significant explicit evidence.

Question 6
Complete

Mark 2.00 out of 2.00

Finesse Bank loaned P2,000,000 to a borrower on January 1, 2020. The loan bears 10% interest and is payable every December 31.
The principal is payable on January 1, 2023. The bank charged origination fees amounting to 300,000 and incurred direct
origination costs of P158,331. 
Compute for the effective interest rate of the loan. 

a. 13%

b. 7%

c. 12%

d. 10%

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Question 7
Complete

Mark 2.00 out of 2.00

Geeko Co. finances come of its current operations by assigning accounts receivable on a notification basis to Josiah Finance. On
July 1, 2020, Geeko assigned, under guarantee, specific accounts amounting to P2,000,000. Josiah Finance advanced to Geeko
80% of the accounts assigned, less a finance charge of 1% of the total accounts assigned. 
On August 1, 2020, Geeko received a statement that Josiah had collected P1,100,000 of the accounts assigned and had made an additional
charge of 1% of the total outstanding payable as of July 31. This charge was deducted from the first remittance due to Geeko from Josiah.

Compute the amount of cash proceeds from the assignment. 

a. 1,584,000

b. 1,980,000

c. 1,600,000

d. 1,580,000

Question 8
Complete

Mark 2.00 out of 2.00

On January 1, 2019, Zion Bank provided a loan of P4,000,000 to a XYZ Co. Under the loan agreement, the effective interest rate is 10% and
that XYZ Co. is to pay the annual interest every December 31. The principal amount of the loan is due on December 31, 2023. On December
31, 2019, the bank needs to measure the 12-month expected credit loss for the loan. The bank determined that the probability of the loan
being in default over the next 12 months is 1% and that 20% of the gross carrying amount will be lost over the term of the loan (Loss Given
Default is 20%). 

On December 31, 2020, the bank has determined that there is a significant increase in the credi risk of the loan receivable. The probability of
the loan being in default over the life of the loan is 10% and that 25% of the gross carrying amount will be lost over the remaining term of the
loan. 

During 2021, XYZ Company began to face financial difficulties. At year-end, the bank considered the loan to be impaired. Interest for that
year was collected. However, only 40% of the principal amount is expected to be received on due date. 

What amount of interest income should be reported on December 31, 2022?

a. 145,447

b. Zero

c. 132,224

d. 200,000

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Question 9
Complete

Mark 2.00 out of 2.00

Graceness, Inc. finances come of its current operations by assigning accounts receivable on a notification basis to XYZ Bank. On July 1,
2020, Graceness assigned, under guarantee, specific accounts amounting to P1,500,000. XYZ Bank advanced to Graceness 60% of the
accounts assigned, less a finance charge of 2% of the total accounts assigned. 

On August 1, 2020, Graceness received a statement that XYZ Bank had collected P920,000 of the accounts assigned and had made an
additional charge of 2% of the total outstanding payable as of July 31. This charge was deducted from the first remittance due to Graceness
from XYZ.

How much is the net proceeds from the assignment of receivables?

a. 900,000

b. 870,000

c. 1,470,000

d. 882,000

Question 10
Complete

Mark 2.00 out of 2.00

On January 1, 2019, Zion Bank provided a loan of P4,000,000 to a XYZ Co. Under the loan agreement, the effective interest rate is 10% and
that XYZ Co. is to pay the annual interest every December 31. The principal amount of the loan is due on December 31, 2023. On December
31, 2019, the bank needs to measure the 12-month expected credit loss for the loan. The bank determined that the probability of the loan
being in default over the next 12 months is 1% and that 20% of the gross carrying amount will be lost over the term of the loan (Loss Given
Default is 20%). 

On December 31, 2020, the bank has determined that there is a significant increase in the credi risk of the loan receivable. The probability of
the loan being in default over the life of the loan is 10% and that 25% of the gross carrying amount will be lost over the remaining term of the
loan. 

During 2021, XYZ Company began to face financial difficulties. At year-end, the bank considered the loan to be impaired. Interest for that
year was collected. However, only 40% of the principal amount is expected to be received on due date. 

Amount of impairment loss to be recognized on December 31, 2019?

a. 8,000

b. 18,140

c. Zero

d. 5,464

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Question 11
Complete

Mark 2.00 out of 2.00

Faithful Bank loaned P3,000,000 to a borrower on January 1, 2020. The loan bears 15% interest and is payable every December 31. The
principal is payable on December 31, 2024. The bank charged origination fees amounting to 300,000 and incurred direct origination costs of
P624,430. 

What is the initial measurement of the loan on January 1, 2020? 

a. 3,624,430

b. 2,675,570

c. 3,000,000

d. 3,324,430

Question 12
Complete

Mark 2.00 out of 2.00

Finesse Bank loaned P2,000,000 to a borrower on January 1, 2020. The loan bears 10% interest and is payable every December 31.
The principal is payable on January 1, 2023. The bank charged origination fees amounting to 300,000 and incurred direct
origination costs of P158,331. 
How much is the interest income to be recognized on December 31, 2020? 

a. 200,000

b. 151,083

c. 241,583

d. 149,917

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Question 13
Complete

Mark 2.00 out of 2.00

On January 1, 2019, Zion Bank provided a loan of P4,000,000 to a XYZ Co. Under the loan agreement, the effective interest rate is 10% and
that XYZ Co. is to pay the annual interest every December 31. The principal amount of the loan is due on December 31, 2023. On December
31, 2019, the bank needs to measure the 12-month expected credit loss for the loan. The bank determined that the probability of the loan
being in default over the next 12 months is 1% and that 20% of the gross carrying amount will be lost over the term of the loan (Loss Given
Default is 20%). 

On December 31, 2020, the bank has determined that there is a significant increase in the credi risk of the loan receivable. The probability of
the loan being in default over the life of the loan is 10% and that 25% of the gross carrying amount will be lost over the remaining term of the
loan. 

During 2021, XYZ Company began to face financial difficulties. At year-end, the bank considered the loan to be impaired. Interest for that
year was collected. However, only 40% of the principal amount is expected to be received on due date. 
Amount of impairment loss to be recognized on December 31, 2021?

a. 2,577,760

b. 2,400,000

c. 2,503,600

d. 1,600,000

Question 14
Complete

Mark 1.00 out of 1.00

To reduce the risks associated with accepting e-mail responses to requests for confirmation of accounts receivable, an auditor most
likely would

a.
Mail second requests to the e-mail respondents

b.
Consider the e-mail responses to the confirmations to be exception

c.
Request the senders to mail the original forms to the auditor

d.
Examine subsequent cash receipts for the accounts in question

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Question 15
Complete

Mark 2.00 out of 2.00

On January 1, 2019, Zion Bank provided a loan of P4,000,000 to a XYZ Co. Under the loan agreement, the effective interest rate is 10% and
that XYZ Co. is to pay the annual interest every December 31. The principal amount of the loan is due on December 31, 2023. On December
31, 2019, the bank needs to measure the 12-month expected credit loss for the loan. The bank determined that the probability of the loan
being in default over the next 12 months is 1% and that 20% of the gross carrying amount will be lost over the term of the loan (Loss Given
Default is 20%). 

On December 31, 2020, the bank has determined that there is a significant increase in the credi risk of the loan receivable. The probability of
the loan being in default over the life of the loan is 10% and that 25% of the gross carrying amount will be lost over the remaining term of the
loan. 

During 2021, XYZ Company began to face financial difficulties. At year-end, the bank considered the loan to be impaired. Interest for that
year was collected. However, only 40% of the principal amount is expected to be received on due date. 
What amount of interest income should be reported on December 31, 2021?

a. 382,584

b. 200,000

c. 174,160

d. 400,000

Question 16
Complete

Mark 2.00 out of 2.00

On January 1, 20x1, ABC Bank extended a 12%, 4-year, P4,000,000 loan to XYZ, Inc. ABC Bank incurred direct origination costs of P364,098.
ABC charged XYZ, Inc. 6% service charge. The effective interest rate on the loan is 11%. 

On December 31, 20x2, ABC assesses that the loan is credit-impaired. All interests accruing on the loan are settled. However, ABC Bank
expects that future interests will not be collected. ABC Bank makes the ff. cash flow projections from the borrower: 

December 31, 20x3: P1,000,000

December 31, 20x4:    1,500,000

December 31, 20x5:    1,500,000

The current prevailing interest rate is 12%

On December 31, 20x3, the financial condition of the borrower improved significantly and the loan was restructured with the following future
cash flows: Principal due two years from December 31, 20x3. Interests collectible starting December 31, 20x4. 

What amount of reversal of impairment should be recognized on December 31, 20x3 under PAS 39? 

Answer: 1467251

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Question 17
Complete

Mark 2.00 out of 2.00

On May 1, Hearty, Inc. factored P500,000 of accounts receivable with a financing company XYZ Co. on a with recourse basis. Under the
casual arrangement, XYZ Co. assessed a finance charge of 2% of the total accounts receivable factored, and retained an amount equal to
10% of the total receivables to cover sales returns. The recourse obligation has an estimated fair value of P15,000. 

What amount is the loss from the factoring on May 1? 

a. 25,000

b. 15,000

c. zero

d. 10,000

Question 18
Complete

Mark 0.00 out of 2.00

On January 1, 20x1, ABC Bank extended a 12%, 4-year, P4,000,000 loan to XYZ, Inc. ABC Bank incurred direct origination costs of P364,098.
ABC charged XYZ, Inc. 6% service charge. The effective interest rate on the loan is 11%. 

On December 31, 20x2, ABC assesses that the loan is credit-impaired. All interests accruing on the loan are settled. However, ABC
Bank expects that future interests will not be collected. ABC Bank makes the ff. cash flow projections from the borrower: 

December 31, 20x3: P1,000,000

December 31, 20x4:    1,500,000

December 31, 20x5:    1,500,000

The current prevailing interest rate is 12%

On December 31, 20x3, the financial condition of the borrower improved significantly and the loan was restructured with the
following future cash flows: Principal due two years from December 31, 20x3. Interests collectible starting December 31, 20x4. 

What amount of reversal of impairment should be recognized on December 31, 20x3 under PFRS 9? 

Answer: 1467251

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Question 19
Complete

Mark 2.00 out of 2.00

On January 1, 20x1,  AprilBank extended a 12%, 4-year, P5,000,000 loan to XYZ, Inc. AprilBank incurred direct origination costs of P364,098.
AprilBank charged XYZ, Inc. 6% service charge. The effective interest rate on the loan is 13%. On December 31, 20x2, AprilBank assesses
that the loan is credit-impaired. Interest accruing for December 31, 20x2 has not been collected. Therefor, AprilBank expects that future
interests will not be collected. AprilBank makes the ff. cash flow projections from the borrower: 

December 31, 20x3: P1,500,000

December 31, 20x4:    1,500,000

December 31, 20x5:    2,000,000

 The current prevailing interest rate is 12%.

What is the amount of impairment loss to be debited on Dec 31, 20x2? 

a. 1,028,341

b. 1,628,341

c. 1,730,815

d. 1,130,815

Question 20
Complete

Mark 2.00 out of 2.00

Faithful Bank loaned P3,000,000 to a borrower on January 1, 2020. The loan bears 15% interest and is payable every December 31. The
principal is payable on December 31, 2024. The bank charged origination fees amounting to 300,000 and incurred direct origination costs of
P624,430. 

What is the carrying amount of the loan as of December 31, 2022? 

a. 2,886,016

b. 3,218,597

c.
3,152,105

d. 3,000,000

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Question 21
Complete

Mark 2.00 out of 2.00

On May 1, Hearty, Inc. factored P500,000 of accounts receivable with a financing company XYZ Co. on a with recourse basis. Under the
casual arrangement, XYZ Co. assessed a finance charge of 2% of the total accounts receivable factored, and retained an amount equal to
10% of the total receivables to cover sales returns. The recourse obligation has an estimated fair value of P15,000. 

On May 30, only P455,000 was collected after sales returns of P8,000. 

The entry to close the recourse obligation on May 30 includes a:  

a. Credit to gain on recourse obligation for P15,000

b. None of the choices

c. Debit to cash for P42,000

d. Debit to loss on factoring for P22,000

Question 22
Complete

Mark 2.00 out of 2.00

On May 1, Harbor Inc. factored P800,000 of accounts receivable with a financing company XYZ Co. on a with recourse basis. Under the
casual arrangement, XYZ Co. assessed a finance charge of 6% of the total accounts receivable factored, and retained an amount equal to 5%
of the total receivables to cover sales returns. The recourse obligation has an estimated fair value of P40,000. 
On May 30, only P750,000 was collected after sales returns of P15,000. 

Compute for the gain or loss from factoring. 

a. 128,000

b. 40,000

c. 48,000

d. 88,000

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Question 23
Complete

Mark 2.00 out of 2.00

Finesse Bank loaned P2,000,000 to a borrower on January 1, 2020. The loan bears 10% interest and is payable every December 31.
The principal is payable on January 1, 2023. The bank charged origination fees amounting to 300,000 and incurred direct
origination costs of P158,331. 
Compute for the initial measurement of the loan. 

a. 2,000,000

b. 1,858,331

c. 2,158,331

d. 2,141,669

Question 24
Complete

Mark 2.00 out of 2.00

On September 1, 2020, Indiana Co. accepted a P500,000, 5-month, 15% interest-bearing note from a customer for an accounts receivable
balance. On November 1, 2020, Indiana discounted the note, as a conditional sale, to Security Bank at 12%. The customer did not pay the
note at maturity. Protest fees amounted to P15,000. 

What is the amount of gain or (loss) on discounting of the note on November 1? 

a. Gain of 15,313

b. Loss of 2,813

c. None of the choices

d. Gain of 2,813

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Question 25
Complete

Mark 0.00 out of 2.00

On January 1, 20x1,  AprilBank extended a 12%, 4-year, P5,000,000 loan to XYZ, Inc. AprilBank incurred direct origination costs of P364,098.
AprilBank charged XYZ, Inc. 6% service charge. The effective interest rate on the loan is 13%. On December 31, 20x2, AprilBank assesses
that the loan is credit-impaired. Interest accruing for December 31, 20x2 has not been collected. Therefor, AprilBank expects that future
interests will not be collected. AprilBank makes the ff. cash flow projections from the borrower: 

December 31, 20x3: P1,500,000

December 31, 20x4:    1,500,000

December 31, 20x5:    2,000,000

 The current prevailing interest rate is 12%.

What is the carrying amount of the loan on December 31, 20x2 that should be used in computing for impairment loss? 

a. 5,619,069

b. 5,019,069

c. 4,916,595
d. 5,516,595

Question 26
Complete

Mark 2.00 out of 2.00

ABC Bank: On January 1, 20x1, ABC Bank extended a 12%, 4-year, P4,000,000 loan to XYZ, Inc. ABC Bank incurred direct origination costs of
P364,098. ABC charged XYZ, Inc. 6% service charge. The effective interest rate on the loan is 11%. 

 On December 31, 20x2, ABC assesses that the loan is credit-impaired. All interests accruing on the loan are settled. However, ABC
Bank expects that future interests will not be collected. ABC Bank makes the ff. cash flow projections from the borrower: 
December 31, 20x3: P1,000,000

December 31, 20x4:    1,500,000

December 31, 20x5:    1,500,000

 The current prevailing interest rate is 12%

Compute for the amount of impairment loss on December 31, 20x2. 

a. 908,976

b. 547,577

c. 853,379

d. 660,780

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