1. On December 1, 2022, an entity assigned on a nonnotification basis accounts receivable of P5,000,000 to a
bank in consideration for a loan of 80% of the accounts less a 5% service fee on the accounts assigned. The
entity signed a note for the bank loan.
On December 31, 2022, the entity collected assigned accounts o P2,000,000 less discount of P200,000. The
entity 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 agreed interest is 1%
per month on the loan balance.
The entity accepted sales returns of P100,000 on the assigned accounts and wrote off assigned accounts of
P300,000.
1. What is the balance of accounts receivable assigned on December 31, 2022?
a.
b.
c.
d.
3,000,000
2,600,000
2,400,000
2,900,000
2. What is the carrying amount of the note payable on December 31, 2022?
a.
b.
c.
d.
5,000,000
3,050,000
4,000,000
2,240,000
3. What is the equity of the assignor in assigned accounts on December 31, 2022?
a. 2,600,000
b. 2,240,000
c.
360,000
d.
400,000
2. An entity factored P5,000,000 of accounts receivable. Control was surrendered by the entity. The transaction
met the criteria to be accounted for as sale but subject to recourse for nonpayment. The fair value of the
recourse obligation is P250,000.
The finance company assessed a fee of 6% and retained a holdback equal to 10% of the accounts receivable.
In addition, the finance company charged 12% interest computed on a weighted average time to maturity of
the accounts receivable for 60 days.
1. What amount was initially received from the factoring of accounts receivable?
a. 4,500,000
b. 4,200,000
c. 4,100,000
d. 4,101,370
2. What total amount should be recognized initially as loss on factoring?
a. 398,630
b. 898,630
c. 800,000
d. 648,630
3. What amount should be reported as loss on factoring assuming the accounts are fully collected by the
factor?
a. 398,630
b. 300,000
c. 550,000
d. 400,000
3. An entity accepted from a customer in settlement of an account a P5,000,000. 180-day 9% note dated August
1, 2022. On September 30, 2022, the entity discounted the note at 12% with recourse at the bank. The note
was paid in full by the maker on maturity. The discounting is accounted for as a conditional sale with
recognition of a contingent liability.
1. What amount was received from the note receivable discounting?
a.
b.
c.
d.
5,225,000
5,075,000
5,016,000
5,000,000
2. What amount should be reported as loss on note receivable discounting?
a.
b.
c.
d.
59,000
16,000
75,000
60,000
3. If the discounting is secured borrowing, what is included in the journal entry to record the transaction?
a.
b.
c.
d.
Debit interest expense P59,000
Credit liability for note discounted P5,000,000.
Credit interest income P75,000
All of these are included in the journal entry
4. On April 1, 2022, an entity discounted with recourse a 9-month, 10% note dated January 1, 2022 with face
of P6,000,000. The bank discount rate is 12%. The discounting transaction is accounted for as a conditional
sale with recognition of contingent liability.
On October 1, 2022, the maker dishonored the note receivable. The entity paid the bank the maturity value of
the note plus protest fee of P50,000.
On December 31, 2022, the entity collected the dishonored note in full plus 12% annual interest on the total
amount due.
1. What amount was received from the note receivable discounting?
a.
b.
c.
d.
6,063,000
6,450,000
6,150,000
5,963,000
2. What amount should be recognized as loss on note receivable discounting?
a. 450,000
b. 387,000
c. 87,000
d. 63,000
3. What total amount was collected from the customer on December 31, 2022?
a.
b.
c.
d.
6,450,000
6,500,000
6,695,000
6,662,500