1.

The category “trade

receivables” includes

A. advances to officers and

employees.
B.imcome tax refunds receivable.
C.caims against insurance
companies for casualties
sustained.
D.none of these

2. Which of the following should

be recorded in
AccountsReceivable?

A.Receivables from officers

B.Receivables from subsidiaries
C. Dividends recetvable
D. None of these

3. What is thepreferable
presentation of accounts
receivable from officers,
employees, or affiliated
companies on a balance sheet?

a. As offects to capital.
B. By means of foomotes only.
C. As assets but separately from
other receivable
D. As trade notes and accounts
receivable if they otherwise
qualify as current aesets.
4.When a customer purchases
merchandise inventory from a
business organizatioa, she may
be given a discount which is
designed to induce prompt
payment. Such a discount is
called a(n)

A.trade discount.
B.nominal discount.
C.enhancement discount.
D.cash discount

5.Trade discounts are

A.not recorded in the accounts;
rather they ares means of
computing a price.
B. used to avold frequent changes
in catalogues.
C. used to quote different prices
for different quantities
purchased.
D. all of the above

6.If a company employs the gross

method of recording accounts
receivable from customers, then
sales discounts taken should be
reported as
A. A deduction from sales in the
income statement
B. an item of “other expense” in
the income statement.
C.a deduction from accounts
receivable in determining the net
realizable value of accounts
receivable.
D. sales discounts forfeited in the
cost of goods sold section of the
income statement.

7. Assuming that the ideal

measure of
short term receivables in the
balance sheet is the discounted
value of the cash to be received
in the future, failure to follow this
practice usually does not make
the balance sheet misleading
because

A.most Short-term receivables are

not interest bearing.
B. the allowance for uncolfectible
accounts includes a discount
element.
C. the amount of the discount is
not material.
D. most receivables can be sold to
a bank or factor
8. Which of the foBowing methods
of determining bad debt expense
does not property match expense
and revenue?

A. Charging bad debts with a

percentage of sales under the
allowance method.

B. Charging bed debts with an

amount derived from @
percentage of accounts receivable
under the allowance method.

C. Charging bed debts with an

amount derived from aging
accounts receivable under the
allowance method.
D Charging bed debts as accounts
are written off as uncollectible,

9. Which of the following methods

of determining annual bad debt
expense best achieves the
matching concept?
A. Percentage of sales
B. Percentage of ending accounts
receivable
C. Percentage of average
accounts receivable
D. Percenmge of average
accounts recetvable
10. Which of the following is a
generally accepted method of
determining the amount of the
adjustment to bad debt expense?

A. A percentage of sales adjusted

for the balance in the allowance
B. Apercentege of sales not
adjusted for the balanced
in the allowance
C. A percentage of accounts
receivable not adjusted
for the balance in the allowance
D. An amount derived from aging
accounts receivable and not
adjusted for the balance in the
allowance
11. The advantage of relating a
company’s bed debt expense to
its outstanding accounts
receivable is that this approach

A.gives a reasonably correct

statement of receivables in the
balance sheet,
B. best relates bad debt expense
to the period of sale.
C. isthe only generally accepted
method for valuing accounts
receivable.
D. makes estimates of
uncollectible accounts
unnecessary.
12. Which of the following
statements is incorrect Fegarding
the classification of accounts and
notes recetvable?

A. Segregation of the differen

types of receivables is required if
they are material.

B. Disclose any lose contingencies

that exist on the receivables.

C.Any discount or premium

resulting from the determination
of present value in notes
receivabl@ transactions is an
seset or liability respectively
D. Valuation accounts should be
appropriately offset against the
proper receivable accounts.

13. At the close of its first year of

operations, December 31, 2017,
Lian Company had accounts
recetvable of PS40,000, after
deducting the related allowance
for doubtful accounts. During
2017, the company had charges
to bed debt expense of P90,000
and wrote off, as uncollectible,
accounts receivable of P40,000.
What should the company report
on its balance sheet at December
31, 2017, as accounts receivable
before the allowance for doubtful
eccounts?
a P670,000 C. P590,000
B. P490,000 D. P440,000

14 Before year-end adjusting

entries, Bass Company's account
balances at December 31, 2017,
for accounts receivable and the
related allowance for
uncollectible accounts were
P600,000 and P45,000,
respectively. An aging of accounts
recetvable indicated that P62,500
of the December 31 receivables
are expected to be uncollectible.
The net realizable value of
accounts receivable after
adjustment ie
A. P582.500. C. P537,500
B.P492,500. D. P555,000.

15. During the year Jantz

Company made an entry to write
off a P4000 uncollectible account.
Before this entry was made, the
balance in accounts receivable
was PS0,.000 and the balance in
the allowance account was
P4,500. The net realizable value
of accounts receivabie after the
write-off entry was

A. P50,000 C. P49,500
B.P41,500 D. P45,500

16. The following information is

available for Reagan Company:

Allowance for doubtful accounts

at

December 31, 2016 P8,000

Credit sales P400,000
during 2017

Accounts receivable deemed

worthless P9,000
and written off during 2017
As a result of a review and aging
of accounts receivable
in earty January 2018, however, it
has been determined that an
allowance for doubtful accounts
of P5,500 is needed at December
31, 2017. What amount
should Reagan record as “bad
debt expense” for the
year ended December 31, 2017?

A.P4500 C.P5500
B.P6500 D.P13,500

A trial balance before

adjustments included the
following:
 Debit Credit
Sales P425,000

Sales
returns and
allowance. P14,000
Accounts
receivable 43,000

Allowance for P760

doubtful accounts
17. If the estimate of
uncollectibies is made by taking
2% of net sales, the amount of
the adjustment is
A.P6700 C.P8220
B.P8,500 D. P9,740.

18. If the estimate of

uncollectibles is made by taking
10% of groes account recetvables,
the amount of the adjustment is
A. P3540 C. P4,300.
B. P4224 D. P5,060.
19. Simpson Company has the
following account balances at
year-end:
Accounts receivable P60,000

Allowance for P3,600

doubtful accounts

Sales discounts P2,400

Simpson should report accounts

receivable at a net emount of

A.P54,000 C. P56,400
B.PS7.600 D. P60,000
20. Holtzman Corporation had a
1/1/2017 balance in the Allowance
for Doubtful Accounts of P
10,000. During 2017,it wrote off
P7,200 of accounts and collected
P2.100 on accounts previously
written off. The balance in
Accounts Receivable was
P200,000 at 1/1 and P240,000 at
12/31. At 12/31/2017, Holtzman
estimates that 5% of accounts
receivable will prove to be
uncoliectible. What is Bad Debt
Expense for 2017?

A. P2000 C.P7,100
B.P9200 D. P12,000
21. Rusch Corporation had a
1/1/17 balance in the Allowance
for Doubtful Accounts of P
12,000. During 2017, wrote off
P8,640 of accounts and collected
P2,520 on accounts previously
written off. The balance tn
Accounts Recetvable was
P240,000 at 1/1 and P268,000 at
12/31. At 12/31/17, Rusch
estimates that 5% of accounts
receivable will prove to be
encollectible. What should Rusch
report as its Allowance for
Doubtful Accounts at 12/31/17?

A.P5,760 C.P5,880
B.P8,280 D. P14,400
 22. Sandier Compeny has the
following account balances at
year-end: Accounts receivable
P80,00 Oo ABowance for doubtful
4,800 accounts Sales discounts
3,200 Sandier should report
accounts receivable at a net
amount of

A.P72,000 C.P75,200
B.P76,800 D. P80,000.

23. Detgado Corporation had a

1/1/17 balance in the Allowance
for Doubtful Accounts of P20,000.
During 2017, & wrote off P 14,400
of accounts and collected
P4.200 on accounts previously
written off. The balance in
Accounts Receivable was P
400,000 at 1/1 and P480,000 at
12/31. At 12/31/17, Delgado
estimates that S% of accounts
receivable will prove to be
uncollecnble. What is Bad Debt
Expense for 2017?
A. P4000 C. P14200
B. P18400 D. 24,000

24. Burnett Corporation had a

1/1/17 balance in the Allowance
for Doubtful Accounts of P
15,000. During 2017, previously
wrote off P 10,800 of accounts
and collected P 3,150 on accounts
previously written off. The
balance in Accounts Receivable
was P300,000 at 1/1 and
P360,000 at 12/31. At 12/31/17,
Burnett estimates that 5% of
accounts receivable will prove to
be uncollectible. What should
Burnett report as its Allowance
for Doubtful Accounts at
12/31/17?

A P7,200 C. P7,350.
B.P10,350 D. P 18,000,
II.NOTES RECEIVABLE

25. According to the PFRSs,

receivables except trade
receivables, are initially
recognized at
A. Fair value
B. Cost
C. Present value
D. Pair value plus direct
transaction costs
26. Mythical Imaginary Co. makes
all of irs sales on 30-day credit
terms. During the period,
Mythical made a special sale to
one of its customers, wherein the
customer was extended a9 month
credit term. Mythical recetved a P
10M noninterest bearing note on
the sale. According to the PFRSs,
Mythical should initially recognize
the receivable at (ignore practical
expedient of PFRS 15)

A. Face amount B. Present

value
C.. Appraised value D. Fairvalue
less costs to sell
27. Short-term receivables
including non-trade recervables
that are currently collectible may
not be discounted to the present
values because

A.Their face value are normally

immaterial

B. They are s0 near their maturity

dates that their
values do not change

C. Present value computation is

very complex

D.The effect of discounting may

be immaterial
28. Svette Slender Co. receive a
3-year, 3%. note receivable from
one of its customers. The current
rate of the date of receipt of the
note was 12%. Svelte should
initially recognize the receivable
at

A. Face amount
B. Present value
C. appraised value
D. Fair value less cost to sell
29. Which of the following rates
may be used to compute for the
interest income on a receivable?

A. Imputed rate of interest

B. Current rate

C. Effective interest rate

D. Nominal rate

30. Which of the following rates

may be used tm compute for the
interest receivable on a note
receivable?
A. imputed rate of interest
B. Current rate
C. Yield rate
D. Nominal rate

31. A noninterest-bearing note

A. Bears no effective interest rate

B. Has a specified principal but an
unspecified interest rate
C. Does not result to any interest
income
D. Has an unspecified principal
and an unspecified, interest

32. The imputed interest rate of

interest is

A. The prevailing rate for a similar

instrument of an issuer with a
similar credit rating
B. Arate of interest that discounts
the face (nominal) amount of the
receivable to the current cash
sales price of the goods or
services
C. The more clearly determinable
of either (a) or (B)
D. None of these

33. The concept of time value of

money

A. Is irrelevant in financial
reporting
B. States that the money loees its
value over time because of
inflation

C. Provides that contractual

agreements to receive cash or to
pay cash in the future will earn or
incur, interests due to passage of
time regardiess of whether
interests have been agreed upon
or not

D.Is a pervasive concept which

affects only financial reporting
but not managerial accounting

34. When a note receivable earns

compounded interest,

A. The principal is due at maturity

but interests are due periodically
B. It means that the note is a long
term asset
C. Both the principal and interest
are due only af maturity date
D.. Interest income on the note ts
computed using a very complex
formula

35. When the contractual cash

flows on a debt instrument that is
measured at amortized cost are
due in lump sum, the present
value (PV) factor used to discount
the future cash flows is
A. PVor₱1

b. PV of ordinary annuity of Pl
C PV ofan annuity due of P1
D. PV of a deferred annuity
36. When the contractual cash
flows on a debt instrument is
measured at amortized cost are
due in installments and the first
installments is due a period from
the date of the instrument, the
present value (PV) factor used to
discount the future cash flows is

A. PVofP1
B. PV of ordinary annuity of ₱1
C.. PVof annuity due of P1
D. PV of deferred annuity
37. When the contractual cash
flows on a debt instrument that is
measured at amortized cost are
due in installments and the first
installment is due at the date of
the instrument, the present value
(PV) factor used to discount the
future cash flows is

A. PVofP1

B. PV of ordinary annuity of P1
C.PVofan annuity due of P1
D.PV ofa deferred annuity
38. Total interest income
recognized over the life of a
poninterest bearing note is

A.Zero
B. Greater than the total interest
received on the note
C. Less than the total interest
recerved on the note

D. Equal to the unearned mterest

mcome on initial recognition

39. The present value of the debt

instrument is computed by
A. Multiplying the furure cash
flows from the note by
an appropriate present value
factor
B. Adding the future cash flows
C. Adding the future cash flows
from the principal to the sum of
the periodic interest receivable
D. Dividing the future cash flows
from the note by an appropriate
present value factor

40. At the beginning of 2016,

Finney Company received a three-
year zero-interest-bearing P'1,000
trade note. The market rate for
equivalent notes was 8% st that
time. Finney reported this note as
a P 1,000 trade note receivable
on its 2016 year-end statement of
financial position and P'1,000 as
sales revenue for 2016. What
effect did this accounting for the
note have on Finney's net
earnings for 2016. 2017, 2018,
and its retained earnings at the
end of 2018, respectively?

A. Overstate, overstate,
understate, zero
B, Overstate, understate,
understate, understate
C.Overstate, overstate, overstate,
overstate
D. Overstate, understate,
understate, zero
41, Maricy Company received a
seven year rero-interestbearing
note on February 22, 2017, in
exchange for property it sold to
O’Rear Company. There was no
established exchange price for
this property and the note has no
ready market. The prevailing rate
of interest for a note of this type
was 7% on February 22, 2017,
7.5% on December 31, 2007, 7.7%
on February 22, 2018, and 8% on
December 31.2018 What interest
rate should be used to calculate
the interest revenue from this
transaction for the years ended
December 31, 2017 and 2018,
respectively?
A. O% and 0% .C 7%and 7%
B. 7% and 7.7% D 78% and &%

42. On December 31, 2017, Eller

Corporation sold for P75,000 an
old machine having an original
cost of P135,000 and a book value
of P60,000. The terms of the sale
were as follows: P15,000 down
payment; P30,000 payable on
December 31 each of the next two
years.
The agreement of sale made no
mention of interest; however, 9%
would be a fair rate for this type
of transaction. What should be
the amount of the notes
receivable net of the unamortized
discount on

December 31, 2017 rounded to

the nearest dollar? (The present
value of an ordinary annuity of 1
at 9% for 2 years is 1.759111)

A. P52,773 C.P67.773
B. P60,000 D. P105.546

43. On fanuary 1, 2017, Melanie

Co. sold a building, which had a
carrying amount of P350,000,
recetving a P 125,000 down
payment and. as additional
consideration, a P400,000
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
at January 1, 2017, was 10%. The
present value of 1 at 10% for
three periods is 0.75. What
amount of interest should be
included mn Melanie's 2017
income statement?

a P0 C.P30,000
B. P35,000 D. P40,000
44 On january 1, 2017, KristeHe
Co. sold goods to Jane Co. Jane
signed a noninterest-bearing note
requiring payment of P60,000
annually for seven years. The first
payment was made on january 1,
2017. The prevailing rate of
interest rate of interest for this
type of note at date of issuance
was 10%. Kristelle should record
the sales revenue in January 2017
of

A. P321,600 C. P292,200
B. P261,600 D.P214,200
USE THE FOLLOWING
INFORMATION TO ANSWER THE
FOLLOWING QUESTIONS;

On January 2, 2017, Zyrus Co. sold

equipment with a Carrying
amount of P480,000 in exchange
for a P600,000 nonénterest
bearing note due january 2, 2020.
There was no established
exchange price for this
equipment. The prevashing rate
of terest for a note of this type at
january 2, 2017, was 10%. 45. In
Zyros’ 2017 income statement,
what amount should be reported
as interest mcome?
A. P9000 C.P45,000
B. P50,000 D. P60,000
46. In Zyrus’ 2017 income
statement, what amount should
be reported as gain (loss) on sale
of machinery?

A.(30,000)loss C. P30,000gain B
P120,000gain D.270,000 gain

47. On December 31, 2017, jet Co.

received two P10,000 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 Hart
Corp. made under customary
trade terms, is due0020in nine
months and the note from Maxx,
Inc. is due in five years. The
market interest rate for similar
notes on December 31, 2017, was
8%. The compound interest
factors to convert future values
into present values at 8% follow:

Present vaiue of
P 1 due in nine 0.944
months

Present value of
P1 due in five 0.680 years

At what amounts should these

two notes receivable be reported
in Jet's December 31, 2017,
balance sheet?

A. Hart, P9,440; Maxx. P6,800

B. Hart. P9.652: Maxx, P7.820
C. Hart. P10,000, Maxx,P6,800

D. Hart, P10,000; Maxx,P7,820

48. Frame Co. hae an 8% note

receivable dated june 30, 2017, in
the original amount of P 150,000.
Payments of P 50,000 in principal
plus accrued interest are due
annually on fuly 1, 2018, 2019,
end 2020. In its june 30. 2017,
balance sheet, what amount
should Frame report as a current
asset for interest on the note
recetvable?

A.PO C. P4000
B. P8000 D. P 12,000

49. On june 1, 2017, Yola Corp

loaned Dale P500,000 on a 12%
note, payable in five annual
installments of P 100,000
beginning Jaguary 2, 2018. ln
connection with this loan, Dale
was required to deposit P'5,000 in
a noninterest-bearing escrow
account. The amount held in
escrow is to be returned to Dale
efter all principal and interest
payments have been made.
Interest on the note is payable on
the first day of each month
beginning July 1, 2017. Dale made
timely payments through
November 1, 2017. On january 2,
2018, Yola recetved payment of
the first principal installment plus
all interest due. At December 31,
2017, Yola's interest receivable
on the loan to Dale should be

A. PO C. P5,000
B. 10,000 D. P15,000
50. Leaf Co. purchased from Oak
Co. a P20,000, 8%, 5-year note
that required five equal annual
year-end payments of P5,009. The
note was discounted to yield 9%
rate to Leaf At the date of
purchase, Leaf recorded the note
at its present value of P19.485.
What should be the total interest
revenue earned by Leaf over the
life of this note?

A. P5,045 C P5,560
B. P8000 D.P9,000

51. On December 30, 2017, Chang

Co. sold a machine to Door Co. in
exchange for a nomunterest-
bearmg note requiring ten anneal
payments of P 10.000. Door made
the first payment an December
30, 2017. The market interest
rate of similar notes at date of
issuance was 8%. In its December
31, 2017, balance sheet, what
amount should Chang report as
note recetvable?

A. P45,000 C. P46,000
B. P62,500 D. P67,100

52. Devin Co. sold to Andre Co. a

P20,000, 8%, 5-year note that
required five equal annual year-
end payments. This note was
discounted to yicid a 9% rate to
Andre, What shoeld be the total
interest revenue earned by Andre
on this aote?

A. P9,000 C. P8,000
B. P5,560 D P5,050

III.LOAN RECEIVABLE

53, What are the effects of direct

loan origination costs and
origination fees to the carrying
amount of a loan receivable?

Direct origination costs

Ongmation fees
Dirct.orig Orig.fees
A. Deducted Added
B. Added Deducted
C Added No effect
D. Deducted. No effect

54. A receivable is impaired if

A.Its a carrying amount exceeds

its recoverabid amount
B. hts recoverable amount
exceeds its carrying amount
C There isa delay in the periodic
payments on the receivable
D. its fair value is less than its
carrying amount

55. The carrying emount of a loan

or note recervable before
impairment

A. Is equal to the unpaid principal

B. Is equal to the unpaid principal
plus ang! unrecorded accrued
interest recervable
C. Excludes any accrued interest
receivable
D. Lesa than the present value of
the note receivable
56. The recoverable amount of a
loan or note reccivable is

A. The present value of the

estimated future cash flows to be
received over the remaining life
of the receivable discounted at
the current interest rate,

B. The present value of the

estimated future casts Glows to
be recetved over the remaining
life of thé receivable discounted
at the original effective, interest
rete,

C. The present value of the

estimated future cash flows to be
received over the remaining life
of the receivable discounted at
the original effective interest rate
or the current market rate,
whichever is more clearty
determinable.

D. The sum of principal plus

interests.

57. Impairment loss on an

impsired recetvable may be
computed as

A. The excess of the present value

of the remaining future cash flows
from the receivable over its
carrying amount
B.The excess of its carrying
amount over the present value of
the remaining fuuure cash Sows
from the, receivable

C. The deticiency of the carrying

amount compared to the present
value of the remameng future
cash flows from the receivable

D The difference between the

remaining future cash flows and
the carrying amount of the
recetvable

58. After impairment, interest

income is
A.Computed by multiplying the
original effective interest rate by
the present value of the
umpaired, receivable

B. Computed by multiplying the

current interest rate by the
present value of the impaired
receivable.

C. Computed by mulnplymng the

more cicarly determinable
between the original effective
interest rate and the current
interest rave by the present value
of the impaired receivable
D Notcomputed anymore

59. Gain on reversal of

impairment loss on a loan
receivable is

A. Recognized in other
comprehensive income
B. Computed as the difference
between the present value of the
remaining future cash flows
discounted at the current rete
and the current carrying amount
of the recetvable

C. Computed as the difference

between the carrying amount of
the receivable had there been no
previous impairment and the
current carrying amount of the
receivables
D. Never recognized

60. The gain on reversal of

impairment

A. Should result to carrying

amount of financial asset in
excess of its carrying amount
assuming no impairment loss had
been recognized previously.

B. Should result to carrying

amount of financial asset in
excess of its new recoverable
amount.
C. Is amortized over the
remaining term of the receivable.

D. In never recognized in other

comprehensivd income,

61. On December 1, 2017, Tigg

Mortgage Co. gave Pod Corp. s
P200,000, 12% loan. Pod received
proceeds of P 194,000 after the
deduction of a P6,000
nonrefundable loan origination
fee. Principal and interest are due
in sixty monthly installments of
P4,450, beginning january 1,
2018. The repayments yield an
effective interest rate of 12% at a
present value of P200,000 and
13.4% at a present value of P
194,000. What amount of accrued
interest receivable should Tigg
inctude in its December 31, 2017
balance sheet?

A. P4450 C. P2,166
B 2000 D. PO

62. On December 1, 2017, Money

Co. gave Home Corp. a P200,000,
11% loan. Money paid proceeds of
P 194,000 after the deduction of a
P6,000 nonrefundable loan
origination fee. Principe! and
interest are due in sixty monthly
instalments of P4,310, beginning
Janvary 1, 2018. The repayments
yield an effective interest rate of
11% at a present value of
P200,000 and 12.4% at a present
value of P 194,000. What amount
of income from this loan should
Money report m its 2017 income
statement?

A.P0 C.P1,833
B.P2,005 D. P7833

USE THE FOLLOWING

INFORMATION TO ANSWER THE
NEZT TWO QUESTIONS;
Duff, Inc. borrowed from Martin
Bank under a ten-year loan in the
amount of P 150,000 with a
stated interest rate of 6%.
Payments are due monthly, and
are computed to be P'1,665.
Martin Bank incurs P4,000 of
direct loan origination costs and
P2,000 of indirect loan origination
costs. in addition, Martin Benk
charges Duff, Inc. s four-poimt
nonrefundable joan Origination
fee.

63.Martin bank,the lender has a

carrying amount of

A.P144,000 C. P148,000
B.P150,000 D. P 152,000

64. Duff. the borrower, has a

carrying amount of
A.P144,400 C P148,000
B. P150,000 D.P152,000 .

FINANCING RECEIVABLE