BAM 006: RECEIVABLES QUIZ 3

1. Rose Company provided the following 4. Ore Company prepared an aging of accounts
information for the current year: receivable on December 31 and determined that
Accounts receivable on January 1 1,300,000 the net realizable value of the accounts
Credit sales 5,400,000 receivable was Php2,500,000.
Collections from customers, excluding Allowance for doubtful accounts on
4,750,000 280,000
recovery January 1
Accounts written off 125,000 Accounts written off as uncollectible 230,000
Collection of accounts written off in prior Accounts receivable on December 31 2,700,000
year (customer credit was not 25,000 Recovery of accounts written off 50,000
reestablished)
Estimated uncollectible receivables per What amount should be recognized as doubtful
165,000
aging of receivables at December 31 accounts expense for the current year?
a. 230,000 c. 150,000
What is the balance of accounts receivable, before b. 200,000 d. 100,000
allowance for doubtful accounts on December 31?
a. 1,825,000 c. 1,950,000 Use the problem below to answer numbers 5 – 7:
b. 1,850,000 d. 1,990,000 Dany Company sold goods to wholesalers on terms 2/15,
n/30. The entity had no cash sales but 50% of the
2. Faye Company provided the following customers took advantage of the discount.
information to current operations: The entity used the gross method of recording sales and
Accounts receivable, Janaury 1 4,000,000 accounts receivable.
Accounts receivable collected 8,400,000 An analysis of the trade accounts receivable at year-end
Cash sales 2,000,000 revealed the following:
Inventory, January 1 4,800,000 Age Amount Collectible
Inventory, December 31 4,400,000 0 – 15 days 2,000,000 100%
Purchases 8,000,000 16 – 30 days 1,400,000 95%
Gross margin on sales 4,200,000 31 – 60 days 400,000 90%
Over 60 days 200,000 50%
What amount should be reported as accounts receivable 4,000,000
on December 31?
a. 8,200,000 c. 2,000,000 5. What amount should be reported as allowance
b. 6,200,000 d. 4,200,000 for sales discount at year-end?
a. 20,000 c. 33,500
3. Ana Company used the net price method of b. 32,400 d. 40,000
accounting for cash discounts. In one of its 6. What amount should be reported as allowance
transactions on December 26 2021, the entity for doubtful accounts at year-end?
sold merchandise with a list price of a. 230,000 c. 190,000
Php5,000,000 to a customer who was given a b. 210,000 d. 200,000
trade discount of 20%, 10% and 5%. Credit term 7. What is the net realizable value of accounts
were 4/10, n/30. receivable at year-end?
a. 4,000,000 c. 3,770,000
The goods were shipped FOB destination, freight b. 3,750,000 d. 3,790,000
collect. Total freight charge paid by the customer 8. Cris Company factored without recourse
was Php100,000. On December 27 2021, the Php2,000,000 of accounts receivable with a
customer returned damaged goods originally bank. The finance charge is 3% and 5% was
billed at Php500,000. retained to cover sales discounts, sales returns
and allowances.
What is the net realizable value of the accounts What amount of cash was received on the sale of
receivable on December 31 2021? accounts receivable?
a. 3,420,000 c. 2,703,000 a. 1,940,000 c. 1,840,000
b. 2,920,000 d. 2,803,200 b. 1,900,000 d. 2,000,000

1
BAM 006: RECEIVABLES QUIZ 3

Use the problem below to answer numbers 9 – 10: starting December 31 2021. The loan matures in three
Manny Company factored Php750,000 of accounts years on December 31 2023.
receivable at year-end. Control was surrendered. The
factor accepted the accounts receivable subject to Principal amount 4,000,000
recourse for nonpayment. The fair value of the recourse Origination fee charged against
obligation is Php20,000. the borrower 342,100
The factor assessed a fee of 2% and retained a holdback Direct origination cost incurred 150,000
equal to 4% of the accounts receivable.
In addition, the factor charged 12% interest computed on After considering the origination fee charged against the
a weighted-average time to maturity of 51 days. borrower and the direct origination cost incurred, the
effective rate on the loan is 12%
9. What is the amount of cash initially received 14. What is the carrying amount of the loan
from factoring? receivable on January 1 2021?
a. 692,425 c. 722,425 a. 4,000,000 c. 4,150,000
b. 720,000 d. 705,000 b. 3,907,900 d. 3,657,900
10. What amount should be recognized initially as 15. What amount should be recognized as interest
loss on factoring the accounts receivable? income for 2021?
a. 12,575 c. 27,575 a. 400,000 c. 456,948
b. 15,000 d. 45,575 b. 380,900 d. 480,000
11. On July 1 2021 Kevin Company sold equipment 16. What is the carrying amount of the loan
to Mark Company for Php1,000,000. Kevin receivable on December 31 2021?
accepted a 10% note receivable for the entire a. 4,000,000 c. 3,864,848
sales price. b. 3,807,900 d. 3,750,932
This note is payable in two equal installments of 17. What amount should be recognized as interest
Php500,000 plus accrued interest on December income for 2022?
31 2021 and December 31 2022. a. 480,000 c. 386,485
On July 1 2022, the entity discounted the note at b. 400,000 d. 463,782
a bank at an interest rate of 12%. Use the problem below to answer numbers 18 – 20:
On December 31 2021, Orange Bank recorded an
What amount of cash was received from the investment of Php5,000,000 in a loan granted to a client.
discounting of note receivable? The loan has a 10% effective interest rate payable
a. 484,000 c. 503,500 annually every December 31. The principal is due in full
b. 493,500 d. 517,000 at maturity on December 31 2024. Unfortunately, the
borrower is experiencing significant financial difficulty
Use the problem below to answer numbers 12 – 13: and will have difficult time in making full payment. The
At the beginning of current year, Jack Company bank projected that the entire principal will be paid at
purchased from Carlos Company a Php2,000,000 8% five- maturity and 4% interest or Php200,000 will be paid
year note that required five equal annual year-end annually on December 31 of the next three years. There
payments of Php500,900. The note was discounted to is no accrued interest on December 31 2021. The present
yield a 9% rate to Jack Company. value of 1 at 10% for three periods is 0.75 and the present
At the date of purchase, Jack Company recorded the note value of an ordinary annuity of 1 at 10% for three periods
at the present value of Php1,948,500. is 2.49.
12. What amount of total interest revenue should be 18. What amount should be reported as loan
recognized by Jack Company over the life of this impairment loss for 2021?
note? a. 752,000 c. 250,000
a. 504,500 c. 800,000 b. 600,000 d. 748,000
b. 556,000 d. 900,000 19. What amount should be reported as interest
13. What amount should be recognized as interest income for 2022?
for the current year? a. 200,000 c. 224,800
a. 175,365 c. 111,200 b. 424,800 d. 500,000
b. 160,000 d. 180,000 20. What is the carrying amount of the loan
Use the problem below to answer numbers 14 – 17: receivable on December 31 2022?
Local Bank granted a loan to a borrower on January 1 a. 5,000,000 c. 4,472,800
2021. The interest on the loan is 10% payable annually b. 3,750,000 d. 4,672,800