PHINMA UNIVERSITY OF PANGASINAN c.

Excluded from total receivables with disclosure of

ACC106 INTERMEDIATE ACCOUNTING 1 contingent liability
P2 - QUIZ 2 d. Excluded from total receivables without disclosure of
SET A contingent liability
NAME: _______________________________________
SECTION: _____________________________________ 8. After being held for 60 days, a 120-day 8% interest-bearing
note receivable was discounted at a
Encircle the letter of your answer. ERASURES are considered bank at 12%. The amount received from the bank is equal to
wrong. Any form of cheating is PROHIBITED and will be dealt in a. Face value less discount rate at 8%
accordance with the University Student Manual. b. Face value less discount rate at 12%
c. Maturity value less discount at 8%
d. Maturity value less discount at 12%
1. Which of the following is a method to generate cash from
accounts receivable? 9. If a note receivable is discounted without recourse
a. Assignment only a. The contingent liability may be disclosed in either a contra
b. Factoring only account to note receivable or
c. Both A and B in a note to the financial statements
d. Neither A nor B b. Liability for note receivable discounted should be credited
c. Note receivable should be credited
2. The equity of the assignor in assigned accounts is equal to d. The transaction should be accounted for as a borrowing as
a. assigned accounts receivable opposed to a sale
b. bank loan balance
c. assigned accounts receivable minus the bank loan balance 10.
d. bank loan balance minus the assigned accounts receivable

3. It is a predetermined amount withheld by a factor as a

protection against customer returns,
allowances and other special adjustments
a. Equity in assigned accounts
b. Service charge
c. Commission
d. Factor’s holdback

4. Which of the following is true when accounts receivables are

factored without recourse?
a. The transaction may be accounted for either as secured 11.
borrowing or sale 12.
b. The receivables are used as collateral for a promissory note
issued to the factor by the
owner of the receivables
c. The factor assumes the risk of collectability and absorbs any
credit losses in collecting the
receivables
d. The financing cost should be recognized ratably over the
13.
collection period of the
receivables

5. If financial assets are exchanged for cash and other

consideration but the transfer does not meet
the criteria for a sale, the transferor and the transferee should
account for transaction as
I. Secured borrowing
II. Pledge of collateral 14.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

6. If receivables are hypothecated (pledged) against borrowings,

the amount of receivables involved
should be
a. Disclosed in the notes
b. Excluded from the total receivables, with disclosure
c. Excluded from the total receivables, with no disclosure
d. Excluded from the total receivables and a gain or loss is
recognized between the face value
and the amount of borrowings
15. Note receivable discounted without recourse shall be
7. Notes receivable discounted with recourse should be a. Excluded from total receivables without disclosure of
a. Included in total receivables with disclosure of contingent contingent liability
liability b. Excluded from total receivables with disclosure of
b. Included in total receivables without disclosure of contingent contingent liability
liability c. Included from total receivables without disclosure of
contingent liability
d. Included from total receivables with disclosure of contingent Assuming all receivables are collected, the corporation’s
liability cost of factoring the receivables would be:
____________________________________________
16. The cost of inventory should not include
I. Purchase price.
II. Import duties and other taxes.
III. Abnormal amounts of wasted materials.
IV. Administrative overhead.
V. Fixed and variable production overhead.
VI. Selling costs. 3. Dan Corporation received a P300, 000, 6-month,
a. II, III, IV, V 12% interest bearing note from a customer. The note
b. III, IV, VI was discounted the same day by Sea Bank at 15%.
c. I, II As a result of the discounting, it should recognize
d. II, III, IV, V, VI interest expense of:

17. Inventories are measured at ________________________________________

a. Lower cost and fair value.
b. Lower cost and net realizable value.
c. Lower cost and nominal value. 4. Jvion Company received from a customer a 1-year,
d. Lower cost and net selling price. P500, 000 note bearing annual interest of 8%.After
holding the note for 6 months, it discounted the note
18. Which of the following costs of conversion cannot be at a nearby bank at an effective interest rate of 10%.
included in the cost of inventory? What amount of cash did it received from the bank?
a. Cost of direct labor.
b. Factory rent and utilities.
c. Salaries of the sales staff (sales department shares the ___________________________________________
building with factory supervisor).
d. Factory overheads based on normal capacity.
5. On November 1, 20x1. XYZ Company borrowed P
19. Inventories are assets ( Choose incorrect one) 400,000 from a bank and pledged its receivable as
a. Held for sale in the ordinary course of business collateral. The interest worth 20,000 was deducted in
b. In the process of production for sale advance. Provide the journal entry:
c. In the form of materials or supplies to be consumed in the
production process or in the rendering of services
d. Held for use in the production or supply of goods or services __________________________________________

20. Which of the following should be excluded from an entity’s

inventories?
a. Goods in transit purchased under FOB shipping point -NOTHING FOLLOWS-
b. Unsold goods out on consignment
c. Goods given to prospective buyers under a sale on trial Key Answer
agreement CCDCC
d. Goods sold under installment sale whereby the entity ACDCC
retains legal title to protect the collectability of the sale price CCCBA
BBCDD

PROBLEM SOLVING: 1. 80,000

2. 313,150
1. On January 1, Deliela Company assigned P500, 000 of 3. 5,850
accounts receivable to X Finance Inc. The company gave 4. 513,000
a 14% note for P450, 000 representing 90% of the 5. Cash 380K
assigned accounts and received proceeds of P432, 000 Discount on LP 20K
after deduction of a 4% fee. On February 1, it remitted LP 400k
P80, 000 to X, including interest for 1 month on the
unpaid balance. As a result of this P80, 000 remittances,
accounts receivable assigned will be decreased by what
amount?

_____________________________________________

2. Shiella Corporation factored P6, 000,000 of accounts

receivable to X Enterprises on October 1, 2021. Control
was surrendered by the corporation. X accepted the
receivables subject to recourse for nonpayment. X
assessed a fee of 3% and retains a holdback equal to 5%
of the accounts receivable. In addition, X charged 15%
interest computed on a weighted-average time to maturity
of the receivables of 54 days. The fair value of the
recourse obligation is P90,000.