Chapter #5

Trade and Other Receivables

TRUE OR FALSE
1. Trade receivables include notes receivable and advances to officers and employees. FALSE
2. The net amount reported for short-term determined receivables is not affected when a specific
account receivable is determined to be uncollectible using the allowance method. TRUE
3. Companies record and report long-term notes receivable at the present value if the cash they expect
to collect. TRUE
4. For receivables sold with recourse the seller guarantees payment to the purchaser if the debtor failed
to pay. TRUE
5. All claims as held current against assets. customers and others for money, goods, or services are
reported as current assets. FALSE
6. Accounts receivable or note are trade receivable that are not evidenced by a formal agreement or
note. TRUE
7. Trade receivables are recognized for revenue simultaneously recognition related revenue when the
criteria for revenue recognition are met. TRUE
8. Trade discounts are used to avoid frequent changes in catalogs and to alter prices for different
quantities purchased. TRUE
9. Credit balances in customer's accounts receivable should be classified as current liabilities. TRUE
10. The percentage-of-sales method results in a more accurate valuation of receivables on the balance
sheet. FALSE
11. Receivables denominated in foreign currency should be translated to local currency using the
exchange rate on balance sheet date. TRUE
12. The fair value of a short-term receivable may be equal to its face amount. TRUE
13. Credit loss is the difference between contractual cash flows that are due to the entity in accordance
with the contract and all the cash flows that the entity expects to receive discounted at the current
effective interest rate. FALSE
14. In the gross method, sales discounts are reported as a deduction from sales. TRUE
15. Any receivables not individually assessed should be collectively assessed for impairment. TRUE
16. When the stated rate of interest exceeds the effective rate, the present value of the note receivable
will be less than its face value. FALSE
17. A decline in the fair value of the asset below its carrying amount is an objective evidence of
impairment of a financial asset. FALSE
18. Notes receivable are generally reported as noncurrent assets. FALSE
19. The carrying value of an impaired note before recognizing a loan impairment excludes accrued
interests. FALSE
20. Assuming that the ideal measure of short-term receivables in the statement of financial position is
the discounted value of the cash to be received in the future, failure to follow this practice usually
does not make the statement position misleading because the amount of the discount is not material.
TRUE
21. When buying receivables with recourse, the purchaser assumes the risk of collectability and absorbs
any credit loss. FALSE
22. Loans and receivables are initially recognized at fair value plus transaction costs that are directly
attributable to the acquisition. TRUE
23. Receivable balance should be valued at face amount minus allowance for doubtful accounts and for
any anticipated adjustments which in the normal course of events will reduce the amount receivable
to estimated realizable value. TRUE
24. If accounts receivable is pledged against borrowing, the amount of accounts receivable pledged shall
be included in total receivables with disclosure. TRUE
25. Loans receivable are normally reported in the financial statements at amortized cost using the
effective interest method. TRUE
26. When a customer purchases merchandise inventory from a business organization, she may be given a
discount which is designed to induce prompt payment. Such a discount is called a cash discount.
TRUE
27. Accounts receivable are classified as current assets whenever accounts receivable arise from
"normal" sales to customers, regardless of the credit terms. TRUE
28. Discount period is the period of time remaining on the term of the note, which is from the date of
discounting to maturity date. TRUE
29. Long-term notes receivables which nominally bear no interest or an interest which is unreasonably
low should be stated at face value. FALSE
30. The receivables turnover ratio is computed by dividing net sales by the ending net receivables.
FALSE

MULTIPLE CHOICE-THEORIES
1. Which of the in following items is a trade receivable?
A. Claim in litigation
 B. Loans to employees
C. Amounts due from customers
D. Receivables from affiliates
2. For banks and financial institutions, receivables arise primarily from
A. loans
B. deposit
C. ithdrawals
D. credit sales
3. The accounting for cash discounts and trade discounts are
A. the same
B. always recorded net
C. not the same
D. tied to the timing of cash collections on the account.
4. What is the imputed interest.
A. Interest based on the stated interest rate.
B. Interest based on the implicit interest rate.
C. Interest based on the average interest rate.
D. Interest based on the coupon rate.
5. Why would a company sell receivables to another company?
A. To improve the quality of its credibility granting process.
B. To limit its legal liability.
C. To accelerate access to amounts collected.
D. To comply with the customer agreement.
6. What is “recourse” as it relates to selling receivables?
A. The obligation of the seller of the receivables to pay the purchaser in the case of the debtor fails to
pay.
B. The obligation of the purchaser of the receivables to pay the seller in the case of the debtor fails to
pay.
C. The obligation of the seller of the receivables to pay the purchaser in the case of the debtor returns
the product related to the sales.
D. The obligation of the purchaser of the receivables to pay the seller if all of the receivables.
7. When specific customers’ account is written off by a company using the allowance method, the effect
on profit and amortized cost of accounts receivable are, respectively
A. no effect, decrease.
B. no effect, no effect.
C. decrease, decrease.
D. decrease, no effect.
8. A 90-day. 15% interest bearing note was discounted to a bank at 18% after the note held for 40 days.
The proceeds received from the bank upon discounting would be the maturity value less the discount
at
A. 18% for 40 days
B. 18% for 50 days
C. 15% for 40 days
D. 15% for 50 days
9. All of the following are characteristics of financial assets classified as loan and receivables, except
A. not quoted in an active market.
B. have fixed or determinable payments.
C. holder had demonstrated positive intention and ability to hold them to maturity.
D. holder does not have financial resources available to continue until maturity.
10. Accounts receivables usually appear in the statement of financial position
A. as either current assets or noncurrent assets, depending on whether the allowance method or the
direct write-off method is account for uncollectible accounts.
B. only if the balance sheet method of estimating uncollectible accounts is used.
C. as current assets, immediately after cash and cash equivalents.
D. as current assets, combined with cash and cash equivalents
11. If the gross amount of receivables includes unearned interest or finance charges, these should be
A. added in arriving at the net amount to be presented in the statement of financial position.
B. ignored.
C. presented in the statement of financial position as liability.
D. deducted in arriving at the net amount to be presented in the statement of financial position.
12. The most theoretically sound method of accounting for cash discounts on credit sales is the
A. net method
B. gross method
C. discounted price method
D. all three approaches are theoretically correct.
13. A non-interest bearing note received in exchange for property, goods, or services recorded at
A. fair market value of property, goods or services or note, whichever is more reliably determinable.
 B. maturity value of note.
C. face value of the note.
D. carrying amount of the property
14. A loss on sale of receivables is recorded when the sale is
A. with recourse
B. without recourse
C. with or without recourse
D. a secured borrowing
15. When an account previously written off is subsequently recovered and collected, the transaction
would
A. increase profit under the direct write off method
B. increase profit under the allowance method
C. decrease profit under the direct method
D. increase net accounts receivable under the allowance method
16. Club Intramuros Enterprise shipped the wrong shade of paint to a customer. The customer agreed to
keep the paint upon being offered a 10% price reduction. The priced reduction is an example of a
A. sale return
B. sales allowance
C. sales discount
D. sales revenue
17. Theoretically, the amount of estimated future returns and allowance on credit sales should be
recorded during the period of sales so as not to overstate sales and ending accounts receivable. In
practice, these estimates are rarely recorded because
A. these is too much uncertainty surrounding such estimates
B. the amount of such returns and allowances is usually not material.
C. such estimates are not allowed according to generally accepted accounting principles
D. the amount of such returns and allowances tend to fluctuate too greatly from period to period.
18. Which of the following methods may not be appropriate for estimating bad debt expense?
A. Percentage of income
B. Aging of accounts receivable
C. Percentage of outstanding receivable
D. Individual or collective assessment of outstanding receivables
19. Which generally accepted accounting principle best supports the establishment of the account,
allowance for doubtful accounts?
A. Continuity principle
B. Exception principle
C. Matching principle
D. Revenue principle
20. A receivable financing that is equivalent to an absolute sale of accounts receivable is
A. assignment
B. discounting
C. factoring
D. pledging
21. When a note receivable is discounted with recourse,
A. Liability on Discounted Notes Receivables is credited equal to the face value.
B. Notes Receivables is credited equal to the face value.
C. Liability on Discounted Notes Receivable is credited equal to the proceeds.
D. Notes Receivable is credited equal to the maturity value.
22. In Orchard Company’s December 31, 2021 statement of financial position, a note receivable was
reported as a non-current asset and its accrued interest for eight months was reported as current
asset. Which of the following terms would fit Orchard’s note receivable?
A. Both principal and accrued interest amounts are payable on April 30, 2022 and April 30, 2023
B. Principal and interest are due on December 31, 2023
C. Both principal and interest amounts are payable on December 31, 2022 and December 31, 2023
D. Principal is due on April 30, 2030 and Interest is due on April 30, 2022 and April 30, 2023.
23. Which of the following statements is incorrect?
A. If credit terms to customers were 2/10, n/30, a two percent discount will be granted if payment is
made within 10 days of the date of sale.
B. If the allowance for doubtful accounts has been underestimated, a sale of the related receivables to
a factor is more likely to result in a gain than in loss.
C. If the estimate of bad debts expense is made on the basis of net credit sales, an entry is made each
period to the account, “Allowance for Doubtful Accounts,” without regard to the prior balance in
that accounts.
D. If the estimate of bad debts expense is made on the basis of net realizable value of the accounts
receivable, the balance of the account, “Allowance for Doubtful Accounts,” is adjusted so that
24. The person who signs a note receivable and promises to pay the principal and interest is the
A. holder
 B. maker
C. owner
D. payee
25. The entry to record the dishonor of a note receivable assuming the payee excepts eventual collection
includes a debit to
A. Cash
B. Notes Receivable
C. Accounts Receivable
D. Allowance for Doubtful Accounts.
26. Camp Aguinaldo Trading received a 60-day, 10% note for P10,000 on April 16. Which of the
following statements are true?
A. The principal of the note plus interest is due on June 15
B. Camp Aguinaldo should record a total receivable due of P10,250 on June 16.
C. The maturity value of this note is P10,000
D. Camp Aguinaldo will receive P10,000 plus interest of P1,000 at maturity.
27. Alabang Country Club factored its receivable without recourse with PRIA Bank. Alabang received
cash as a result of this transaction which is best described as
A. a loan from PRIA Bank collateralized by Alabang’s accounts receivable.
B. a loan from PRIA Bank to be repaid by the proceeds from Alabang’s accounts receivable.
C. a sale of Alabang’s accounts receivable to PRIA Bank, with the risk of uncollectible accounts
retained by Alabang.
D. a sale of Alabang’s accounts receivable to PRIA Bank, with the risk of uncollectible accounts
transferred to PRIA Bank
28. Beverly Place received a three-year, non-interest trade note for P50,000 on January 1, 2021. The
current interest rate at that time was 15% for similar notes. Beverly recorded the receipt of the note
as follows:
Notes Receivable 50,000
Sales 50,000
What is the effect of this accounting for the notes receivable on Beverly Place’s profit for years
2021, 2022, and 2023 and its retained earnings at the end of 2023, respectively?
A. overstate, overstate, understate, no effect
B. overstate, understate, understate, no effect
C. overstate, understate, understate, understate
D. no effect on any of these.
29. A company uses allowance method to recognize uncollectible accounts expense. What is the effect at
the time of collection of an account previously written off on the following accounts?
Allowance for Bad Debts Bad Debts Expense
A. No Effect No effect
B. Increase No effect
C. Increase Decrease
D. No Effect Decrease
30. The amount of accounts receivable is included in total receivables with appropriate disclosures when
Pledged Assigned Factored
A. Yes Yes Yes
B. Yes Yes No
C. Yes No No
D. No Yes No
31. Fontana Company received a seven-year zero-interest-bearing note on February 22, 2021, in
exchange for property it sold to Lakewood Company. There was no establishes exchange price for
this property and the mote has no ready market. The prevailing rate of interest for a note of this type
was 7% on February 22, 2021. 7.5% on December 31, 2021, 7.7% on February 22, 2022, and 8% on
December 31, 2022. What interest rate should be used to calculate the interest revenue from this
transaction for the years ended December 31, 2021 and 2022, respectively?
A. 0% and 0%
B. 7% and 7%
C. 7% and 7.7%
D. 7.5% and 8%
32. If there are any rights and obligations created or retained in the transfer of financial asset, they
should be
A. derecognized immediately
B. recognized separately as assets or liabilities
C. evaluated first by comparing the entity’s exposure before derecognizing the financial asset.
D. none of these.
33. When accounts receivable is factored without recourse, what does the transferor credit?
A. Accounts receivable
B. Accounts receivable assigned
C. Liability
 D. Sales
34. When comparing the allowance method of accounting for bad debts with direct write off method,
which of the following is true?
A. The direct write off method is exact and also better illustrates the matching concept.
B. The direct write off method is theoretically superior
C. The direct write off method requires two separate entries to write off an uncollectible account.
D. The allowance method is less exact but it better illustrates the matching principle.
35. When the direct write off method of recognizing bad debts expense is used, the entry to write off a
specific customer account would
A. increase profit
B. have no effect on profit
C. increase the accounts receivable balance and increase profit
D. decrease the accounts receivable balance and decrease profit.
36. It is predetermined amount withheld by a factor as a protection against customer returns, allowance
and other special adjustments.
A. Equity in assigned accounts
B. Service charge
C. Factor’s holdback
D. Loss on factoring
37. The assignor’s equity in assigned accounts that is required to be disclosed in the notes to the
financial statement is equal to the
A. bank loan balance
B. assigned accounts receivable
C. bank loan balance less the assigned accounts receivable balance
D. assigned accounts receivable balance less than the bank loan balance
38. Wakwak Company prepares an accounts receivable aging schedule with a series of computation as
follows: 2% of the total peso balances from 1-60 days past due, plus 5% of the total peso balance of
accounts from 61-120 days past due and so on. How would you describe the total amount
determined in this series of computation?
A. It is the amount of bad debts expense for the year.
B. It is the amount that should be added to the allowance for bad debts at year end.
C. It is the amount of the desired credit balance of the allowance for bad debts to be reported in the
year-end financial statements.
D. When added to the total of the accounts written off during the year, this new sum is the desired
credit balance of the allowance account.
39. Which of the following is true?
A. A debtor may not grant a security interest in certain assets to a lender to serve as collateral
without recourse
B. A debtor may not grant a security interest in certain assets to a lender to serve as collateral with
recourse
C. The arrangement of having collateral transferred to a secured party is known as a pledge
D. Secured parties are never permitted to sell collateral held under a pledge
40. When calculating interest on a promissory note with the maturity date stated in the terms of days,
the
A. maker pays more interest if 365 days are used instead of 360
B. maker pays the same interest regardless is 365 or 360 days are used
C. payee receives less than interest if 360 days are used instead of 365
D. payee receives less than interest if 365 days are used instead of 360

MULTIPLE CHOICE-PRACTICAL
A. Presented below are unaudited balances of selected accounts of Hawks Company as of December 31,
2021:
Debit Credit
Cash 500,000
Accounts Receivable 1,300,000
Allowance for Uncollectible Accounts 8,000
Sales (net) 6,570,000
Additional information:
● Goods amounting to P50,000 were invoiced for the account of Variety Store recorded on
January 2, 2022 with terms of net 60 days, FOB shipping point. The goods were shipped to
Variety Store on December 30, 2021.
● The bank returned on December 29, 2021, a customer's check for P5,000 marked "Drawn
Against Insufficient Funds" but no entry was made.
(1) What is the adjusted balance of Accounts Receivable at December 31, 2021?
a. P1,355,000
b. P1,350,000
c. P1,305,000
 d. P1,300,000

B. On the December 31, 2021 balance sheet of Mavericks Co., the current of the following:
Trade accounts receivable, including 12% VAT P30,000
Trade notes receivable due in January 15, 2023 25,000
Allowance for uncollectible accounts (2,000)
Claim against shipper for goods lost in transit (November 2021) 3,000
Receivable from sale of goods to employees net of huge discounts 5,000
Selling price of unsold goods sent by Mavericks on consignment at 130% of cost (not included in
Mavericks' ending inventory) 26,000
Security deposit on lease of warehouse used for storing some inventories. 30,000
(2) December 31, 2021, the correct total of Mavericks current net
a. P57,786.
b. P61,000.
c. P87,000.
d. P91,000.

C. Presented below is the composition of the Accounts Receivable for Jazz Enterprise as of December
31, 2021:
Advances to officers, P320,00 due in April 2022
Deposit to customer for-'bidding projects
Debit balance on supplier's account for inventory purchased on account
Merchandise sales through credit cards
Other trade receivables – unassigned
Trade payables
Trade receivables
Additional information:
● The trade receivables account is net of P160,000 credit customer's accounts, including
P12,000 accountsreceivableto which is definitely uncollectible, and includes dividend
P60,000 and assigned trade accounts of P400,000.
● The trade payables account is net of P120,000 debit balance in accounts
(3) How much is the total trade receivables as of December 31, 2021?
a. P680,000
b. P1,708,000
c. P1,988,000
d. P2,388,000
(4). How much should be presented in the statement of financial trade and other receivables as of
December 31, 2021?
a. P1,708,000
b. P1,928,000
c. P2,868,000
d. P2,928,000

D. The following independent cases relate to accounting for cash discounts:

(5) Pelicans Inc. made a P15,000 sale on account with the following terms: 1/15, n/30. If company
uses the net method to record sales made on credit, how much should be recorded as?
a. P 14,700
b. P 14,850
c. P 15,000
d. P 15,150
(6) Pelicans Inc. made a P15,000 sale on account with the following terms: 1/15, n/30. If company
uses the gross method to record sales made on credit, what is/are debits in the journal entry to
record the sale?
a. Debit Accounts Receivable for P14,850.
b. Debit Accounts Receivable for P14,850 and Sales Discounts for 150
c. Debit Accounts Receivable for P15,000.
d. Accounts Receivable for P15,000 and Sales Discounts for 150
(7) Pelicans Inc. made a P15,000 sale on account with the following terms: 2/10, n/30. If company
uses the net method to record sales made on credit, what is/are debits in the journal entry to record
the sale?
a. Debit Accounts Receivable for P14,700.
b. Debit Accounts Receivable for P14,850 and Sales Discounts for 300
c. Debit Accounts Receivable for P15,000.
d. Accounts Receivable for P15,000 and Sales Discounts for 300
E. Pistons Company, a VAT-registered company, sold an item on credit for P5,000,000 less multiple
trade discounts of 20% and 5%.

(8) The correct entry to record this sale is

a. Account Receivable 5,600,000
Trade Discount 1,200,000
Sales 5,000,000
Output Tax 600,000
Allowance Output Tax 1,200,00

b. Account Receivable 5,600,000

Sales 5,000,000
Output Tax 600,000

c. Account Receivable 3,800,000

Sales 3,800,000

d. Account Receivable 4,256,000

Sales 3,800,000
Output Tax 456,000

F. The following relate to a single sale of goods made by Spurs in 2021:

Selling price P500,000
Freight Cost 5,000
Terms 3/15, n/30
Shipping Date December 28, 2021
Date goods received by the customer January 3, 2022
Date payment is received by Spurs January 5, 2022

(9) If the term is FOB destination, how much sales should be recorded by Spurs for the year ended
December 31, 2021?
a. P0
b. P490,000
c. P495,000
d. P500,000
(10) If the term is FOB shipping point, freight collect, how much net cash did Spurs receive on
January 5, 2022?
a. P 480,000
b. P 485,000
c. P 490,000
d. P 495,000
(11) If the term is FOB destination, freight collect, how much net cash did Spurs receive on January 5,
2022?
a. P 480,000
b. P 485,000
c. P 490,000
d. P 495,000
(12) If the term is FOB shipping point, freight prepaid, how much net cash did Spurs receive on
January 5, 2022?
a. P 480,000
b. P 485,000
c. P 490,000
d. P 495,000
(13) If the term is FOB destination, freight prepaid, how much net cash did Spurs receive on January
5, 2022?
a. P 480,000
b. P 485,000
c. P 490,000
d. P 495,000
G. Cavaliers Company uses the net price method of accounting for cash discounts. In one of its
transactions on December 31, 2021, Cavaliers Company sold merchandise with a list price of
P4,000,000 to a client who was given as trade discount of 20% and 10%. Credit terms given by
Cavaliers Company were 5/10, n/30. The goods were shipped FOB Destinations, freight collect. Total
Freight charge paid by the client was P100,000. On December 20,2021, the client returned damaged
goods originally billed at P400,000.
 (14) What is the net realizable value of this accounts receivable on December31. 2021?
a. P 2,636,000
b. P 2,592,000
c. P2,492,000
d. P2,380,000
H. Thunder Company is engaged in the sale of various home and office furnishing. It caters accounts to
both receivable cash and credit customers. The following affecting the accounts receivable of
Thunder Company took place during the year 2021:

Sales (cash and credit) 591.050

Cash received from cash customers 205, 175
Cash received from credit customers (P281,300 was received from customers
who took advantage of the discount feature of the Company’s
credit terms 3/10, n/30 320,800
Accounts’ written off as worthless 4,955
Credit memoranda issued to credit customers for
sales returns and allowances 26, 275
Cash refunds given to cash customers for sales returns and allowances 16,972
Recoveries on accounts written off as uncollectible in prior periods
(not included in cash collections stated above) 6,615
An aging of the receivables indicates that P17,300 of the accounts receivable balance are deemed
uncollectible.
The following balances were taken from the December 31, 2020 statement of financial position.
Accounts Receivable - P95,842 Allowance for Bad Debts - P9,740
(15) What are the balances of Accounts Receivable and Allowance for Bad Debts that would be shown
in the December 31, 2021 statement of financial position?
a. P120,987 and P17,300
b. P120,987 and P11,400
c. P120,987 and P9,740
d. P120,987 and P5,900
(16) What is the amount of bad debts expense reported in profit or loss for the year ended December
31, 2021?
a. P 17,300
b. P 11,400
c. P9,740
d. P5,900

I. Bucks Company's terms of sale is 3/10, 1/20, n/60 and it provides for uncollectible accounts based
on aging of its receivables at year-end. The balance of selected accounts taken from the December 31,
2020 statement of financial position of Bucks Company are as follows:

Accounts Receivable - P674,000 Allowance for Bad Debts - P24,000

The following transactions (in summary) affecting accounts receivable occurred during the year
ended December 31, 2021:
Sales on account 3,000,000
Cash received from customers 3,200,000
Cash received includes the following:
Customers paying within the 10-day discount period 1,746,000
Customers paying within the 20-day discount period 990,000
Recovery of accounts written off 6,000
Customers paying beyond the discount period ?
Accounts receivable written off as worthless 22,000
Credit memoranda for sales returns 12,000

An aging of the accounts receivable and estimate of uncollectible accounts at December 31, 2021
revealed the following:

(17) What are the balances of accounts receivable and the related allowance account at December 31,
2021?
a. P376,000 and P25,300
b. P376,000 and P33,300
c. P382,000 and P25,300
d. P382,000 and P33,300
(18) How much is the bad debts expense for the year 2021?
a. P 41,300
b. P 33,300
 c. P 31,300
d. P 25,300

J. (19) What is the bad debts expense for Maverick Company for the year?

a. P275,000
b. P425,000
c. P440,000
d. ?640,000

K. Celtics Company had the following data relating to its accounts receivable:
Accounts Receivable, December 31, 2020 P1,300,000

Credit sales for 2021 5,400,000

Collections from customers during 2021, including recoveries 4,750,000

Accounts written off on September 30, 2021 125,000

Recoveries of accounts previously written off in prior years 25,000

Estimated uncollectible receivables per aging, December 31, 2021 165,000\

(20) How much is Celtics Company’s net accounts receivable at December 31, 2021?
a. P1,660,000
b. P1,685,000
c. P1,825,000
d. P1,850,000
L. Warriors Company prepared an aging of its accounts receivable at December P85,200.31, L. 2021and
determined that the estimated uncollectible on that date was During 2021, some customers' accounts
were written off.

Additional information is available as follows:

Allowance for Bad Debts, December 31, 2020 P63,000

Bad debts expense reported in profit or loss 18,000
Accounts Receivable, December 31, 2021 607,500
Uncollectible accounts recovery during 2021 12,000

(21) How much were the accounts written off during 2021?
a. P6,000
b. P7,800
C. P18,000
d. P22,200

M. You are given the following information relating to Suns Trading:

Gross profit rate based on sales 25%

Accounts Receivable, December 31, 2020 P120,000
Collections on accounts receivable during 2021 545,000
Cost of goods available for sale during 2021 690,000
Merchandise Inventory, December 31, 2021150,000 Of the total sales during the year, eighty
percent (80%) were made on account.

(22) What was the company's Accounts Receivable balance at December 31, 2021?
a. P115,000
b. P151,000
c. 159,000
d. 295,000

N. Kings Company has the following data relating to accounts receivable for the year ended December
31, 2021:

Accounts Receivable, January 1 P 325,000

Allowance for Bad Debts, January 1 18,400
Sales during the year, all on account, terms: 5/10, 3/15, n/30 2,800,000
Cash received from customers during the year 2,260,000
 Accounts written off during the year 17,500
Sales returns and allowances 14,280
An analysis of cash received from customers during the year revealed that P1,140,000 was received
from customers availingthe10-daydiscountperiod P873,000 was received from customers availing
the15-day discount period P12,000 represented recovery of accounts written off, and the balance we'
received from customers paying beyond the discount period.

Kings Company's year-end balance of allowance for bad debts was estimated. be 5% of the
outstanding accounts receivable as at December31,2021, based the aging of the accounts.

(23) Accounts receivable balance at December 31, 2021 is

a. P770, 220
b. 58, 220
c. 746, 220
d. 742, 620

(24) Bad debts expense for the year ended December 31, 2021 is
a. P 37,911
b. P37, 311
c. P25, 011
d. P 24,411

O. Timber Company had the following long-term receivable account balancesat December 31, 2020:

Notes receivable from May Company 3,000,000

Notes receivable from officer 1,500,000

Transactions during 2021 and other information relating to Timberwolves Company’s long-term
receivables were as follows:

TheP3,000,000 notes receivable, dated October 1, 2020 bears interest at 10%. Principal payments of
P1,000,000 plus appropriate interest are due on October 1, 2021, 2017, and 2018. The first principal
and interest payment were made on October 1, 2021.

The P1,500,000 notes receivable is dated January 1, 2020, bears interest at 8% and is due on January
1, 2018. Interest is payable annually on December 31 and all interest payments were made on their
due dates.

On January 1, 2021, Timber sold one of its divisions to Bucks Company for P1,000,000 under an
installment sale contract. Bucks made a P370,000 cash down payment on the same date and signed a
five-year, 12% note for the P630,000 balance. The equal annual payments of principal and interest
on the note will be P175,000 on January 1, 2017 through January 1, 2021.

(25) What is the accrued interest receivable on December 31, 2021 arising from the data?
a. P275,000
b. P245,600
c. P154,600
d. P125,600

P. On January 1, 2021, Grizzlies Corporation sold a piece of equipment that was acquired ten years ago
for P350,000. At the time of sale, the equipment had an accumulated depreciation of P240,000.
Grizzlies received a non-interest bearing note for P300,000in exchange fortheequipment. The note is
due on December 31, 2022. There is no readily available market value for the equipment, but the
current market rate of interest for comparable notes is 12%. The present value of P1 at 12% for two
periods is 0.7972.

(26) How much is the gain on the sale of equipment?

a. P129,160
b. P90,000
c. P50,000
d. PO

Q. On January 1, 2021, Hornets Company sold land that originally cost P400,000 to the Egi Company. As
payment, Egi gave Hornets a P600,000 note. The note bears an interest rate of 8% and is to repaid in
three annual installments of P200,000 plus interest on the outstanding balance. The first payment is
 due on December 31, 2021. The market price of the land is not reliably determinable. The prevailing
interest rate for notes of this type is 8%.

(28) How much is the gain on the sale of land?

a. P400,000
b. P200,000
c. P103,105
d. P66,667

(29) much is the interest revenue for the year 2021?

a. P 48,000
b. P 32,000
c. P 16,000
d. PO

(30) Assume the same facts given in the problem, but change the pres rate for notes of this type
to 12% (instead of 8%). At how my note be recorded on January 1, 2021?
a. P 600,000
b. P560,138
c. P480,360
d. P 427,080

(31) How much is the interest revenue for the year 2021?
a. P67,217
b. P57,643
c. P51,250
d. P 48,000

(32) Using the assumption of 31, No. 2021? (30), what is the amortized cost of the receivable at
December
a. P 600,000
b. P 400,000
c. P 379,355
d. P 290,003

R. Nuggets Company sells equipment withabookvalueofP800,000, receiving. non-interest-bearing note

due in three years with a face amount of P1,000,000. There is no established market value for the
equipment. The interest factor to rate on similar obligation is estimated at12%. Round off present
value factor to decimal places.

(33) Nuggets should report gain (or loss) on the sale and interest revenue respectively, for the first
year at

a. P200,000 and P288,000

b. P200,000 and P96,000

c. P (88,000) and P120,000
d. P (88,000) and P85,440

S. On January 1, 2021, Pelicans Company sold an equipment to Hornets Company which had a carrying
value on Pelicans' books of P100,000. Hornets gave Pelicans a P600,000, non-interest-bearing note,
payable in five equal annual installment of P120,000 with the first payment due on December 31, 2021.
There was no established price for the equipment and the note has no ready market value.

The prevailing rate of interest for a similar note at January 1, 2021 was 12%. Present value (PV) and
future value (FV) factors for 5 periods at 12% are:

PV of P1 - 0.57PV of an annuity of P1 - 3.60

FV of P1 - 1.76FV of an annuity of P1 - 6.35

(34) The interest revenue for 2021 is

a. P72,000
b. P57,600
c. P51,840
d. P14,400
 (35) How much is the amortized cost of the notes receivable at December 31, 2021?
a. P483,840
b. P432,000
c. P363,840
d. P236,540

T. On January 1, 2021, Rockets Corporation sold equipment costing P380,000 with accumulated
depreciation of P160,000 on the date of sale. Rockets received as consideration for the sale, a
P400,000, non-interest-bearing note, due January 1, 2024. There was no established exchange price
for the equipment and the note had no ready market. The prevailing rate of interest for a note of this
type at January 1, 2021 was 10%. The present value of 1 at 10% for three periods is 0.75.

(36) In the 2021 profit or loss, how much should be reported as interest revenue?
a. P40,000
b. P33,000
c. P30,000
d. P13,500

(37) What is the note's carrying amount at December 31, 2021?

a. P340,000
P330,000
c. P300,000
d. P135,000

(38) Assuming that the equipment was sold and the note described in the problem was received on
July 1, 2021, all other data being the same, what is the interest revenue for the year ended December
31, 2021?
a. P15,000
b. P16,500
c. P20,000
d. P30,000

U. Grizzlies Company accepted a P400,000 face value, six-month, 10% note date May 15 from a
customer. On that same date, Grizzlies discounted the note at PRIA Bank at a 12% discount rate.

(39) How much cash should Grizzlies receive from the bank on May 15?
a. P400,000
b. P396,000
c. P394,800
d. P387,200

(40) Assume that the Grizzlies discounted from the note four months prior to its maturity date, what
is the proceeds from the noted discounting?
a. P386,400
b. P400,000
c. P403,200
d P411,600

V. Nuggets Company accepted a P400,000 face value, six months, 10% note day May15 from a
customer. After holding the hut to months, Nuggets discounted the note without recourse an at PRIA
bank at a 70 discount rate and appropriately recorded accounted prior to discounting as a sale.
Accrued interest was appropriately recorded accounted prior discounting.

(41) What was the gain or loss recognized by Nuggets on the sale of not receivable?
a. P3,466.67 loss
b. P3,466.67 gain
c. P3,200.00 loss
d. P3,200.00 gain