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QUIZ - AR (IFRS)

Multiple Choice
Identify the choice that best completes the statement or answers the question.

1. Based on the aging of its accounts receivable at December 31, Pribob Company determined that the net
realizable value of the receivables at that date is 760,000. Additional information is as follows:

Accounts Receivable at December 31 ................ 880,000

Allowance for Doubtful Accounts at January 1 ...... 128,000 (cr)
Accounts written off as uncollectible during the
year ............................................ 88,000

Pribob's doubtful accounts expense for the year ended December (31 is
a. 80,000.
b. 96,000.
c. 120,000.
d. 160,000.

2. Gray Company had an accounts receivable balance of 50,000 on December 31, 2020, and 75,000 on
December 31, 2021. The company wrote off 20,000 of accounts receivable during 2021, and collected
3,000 on an account written off in 2019. Sales for the year 2021 totaled 620,000. All sales were on
account. The amount collected from customers on accounts receivable during 2021 was
a. 575,000.
b. 578,000.
c. 600,000.
d. 595,000.

3. The following information is from the records of Prosser, Inc. for the year ended December 31, 2021.

Allowance for Doubtful Accounts, January 1, 2021 .. 6,000 (cr)

Sales, 2021 ....................................... 2,920,000
Sales Returns and Allowances, 2021 ................ 32,000

If the basis for estimating bad debts is 1 percent of net sales, the correct amount of doubtful accounts
expense for 2021 is
a. 22,800.
b. 23,200.
c. 28,880.
d. 34,880.

4. Maple Company provides for doubtful accounts expense at the rate of 3 percent of credit sales. The
following data are available for last year:

Allowance for Doubtful Accounts, January 1 ........ 54,000 (cr)

Accounts written off as uncollectible during the
year ............................................ 60,000
Collection of accounts written off in prior years .
(customer credit was re-established) .............. 15,000
Credit sales, year-ended December 31 .............. 3,000,000

The allowance for doubtful accounts balance at December 31, after adjusting entries, should be
a. 45,000.
b. 84,000.
c. 90,000.
d. 99,000.
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5. A method to generate cash from accounts receivable.

A. Discounting C. Assignment
B. Factoring D. Assignment and factoring

6. Which of the following is true about loans receivable?

a. It is a financial asset arising from a loan granted by a bank or other financial institution to a
borrower or a client
b. It enables the holder to obtain credit up to predetermined limit from the issuer of the card for the
purchase of goods and services.
c. It is a financial asset supported by formal promises to pay usually in a form of notes.
d. It is financial asset that represent the contractual right to receive cash or another financial asset
from another entity.

7. If a note receivable is discounted with recourse

a. Contingent liability does not exist
b. Note receivable discounted is credited.
c. Liability for Note receivable discounted is credited
d. Note receivable must be credited

8. Calcu Corporation assigned P5,000,000 of accounts receivable as collateral for P2,500,000 8% loan
with a bank. The entity also paid a finance fee of 5% on the transaction upfront. What amount should be
recorded as gain or loss on the transfer of accounts receivable?
a. 0. c. 200,000 gain
b. 105,000 loss d. 100,000 loss

9. A method of estimating uncollectible accounts that emphasizes asset valuation rather income
measurement is the allowance method on
a. Aging of accounts receivable.
b. Direct write off
c. Gross sale
d. Credit sales less return and allowances

10. If receivables are hypothecated 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 amount and
the amount of borrowings

11. Carla Received from a customer a one-year, P375,000 note bearing annual interest of 8%.After holding
the note for six months, Carla discounted the note at I-Bank at an effective interest rate of 10%.

How much should Carla receive from the bank?

a. 371,428.50
b. 384,750.00
c. 392,857.50
d. 405,000.00

12. On January 1, 2021, Shine Co. sells its equipment with a carrying value of P160,000. The company
receives a non-interest bearing note due in 3 years with a face amount of P200,000. There is no
established market value for the equipment. The prevailing interest rate for a note of this type is 12%.
The following are the present value factors of 1 at 12%:

Present value of 1 for 3 periods 0.71178

Present value of an ordinary annuity of 1 for 3 periods 2.40183

What is the gain or loss to be recognized on the sale of the equipment?

a. 17,644 loss
b. 122 gain
c. 17,644 gain
d. 40,000 gain
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13. 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. Factor’s holdback
d. Loss on factoring.

14. Note receivable discounted with recourse should be

a. Excluded from total receivables without disclosure of contingent liability

b. Excluded from total receivables with disclosure of contingent liability
c. Included in total receivables without disclosure of contingent liability
d. Included in total receivables with disclosure of contingent liability

15. On October 21, 2019, Cassava Company assigned specific accounts receivable totaling 4,000,000 as a
collateral on a 3,000,000, 10% note form a certain bank. The entity will continue to collect the assigned
accounts receivable. In addition to the interest on the note, the bank also charged a 8% finance fee
deducted in advance on the 3,000,000 value of the note.

What amount of cash was received from the assignment of accounts receivable on October 21, 2019?
a. 2,500,000
b. 2,760,000
c. 3,000,000
d. 3,275,000

16. Sakura Company sold 7,900,000 in accounts receivable for cash of 7,000,000. The factor withheld
10% of the cash proceeds to allow for possible customer returns and other adjustments. An allowance
for bad debts of 500,000 had previously been established by the entity in relation to this accounts.

What is the loss on factoring that should be recognized?

a. 400,000
b. 390,000
c. 500,000
d. 420,000

17. At the beginning of the current year. Mandy Company sold 5,800,000 in accounts receivable for cash of
5,000,000. The factor withheld 10% of the cash proceeds to allow for possible customer returns and
other adjustments. An allowance for bad debts of 600,00 had previously been established by Mandy Co.
in relation to these accounts. What was the loss on factoring recognized by Moody Co.?
a. 200,000
b. 700,000.
c. 800,000
d. 500,000

18. On November 1, 2017 Nairobi Company discounted with recourse at 10% a one-year, non-interest
bearing, P2,050,000 note receivable maturing on January 31, 2018. The discounting of note receivable
is accounted for as a conditional sale with recognition of a contingent liability.

What amount of contingent liability should be disclosed in the financial statements for 2017?
a. 2,050,000
b. 2,000,000
c. 2,033,333
d. 0

19. Draco Malfoy reported the “receivables” account with a debit balance of 2,000,000
The allowance for doubtful accounts had a credit balance of 60,000 on the same date
Subsidiary details revealed the following
Trade accounts receivables 800,000
Trade noted receivables 200,000
Advances payments for purchase of merchandise 150,000
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Cash advance subsidiary 300,000

Claim from insurance company 30,000
Subscription receivables due in 60 days 150,000
Accrued interest receivables 90,000

Compute the amount to be presented as “trade and other receivables” under the current assets
a. 1,036,000
b. 1,600,000
c. 1,306,000
d. 1,360,000

20. Jostine Company factored P800, 000 of accounts receivable to JP Company on July 1, 2021. Jostine
surrendered control. JP accepted the accounts receivable subject to recourse for non-payment. JP
assessed a fee of 2% and retains a holdback equal to 5% of the accounts receivable. In addition, JP
charged 15 % interest computed on a weighted average time to maturity of the receivables of 41 days.
The fair value of the recourse obligation is P16,000.

What are the amount of cash received and the cost of factoring the receivables?
Cash received Cost of Factoring
a. 714,520 85,480
b. 730,520 29,480
c. 754,520 16,000
d. 770,520 69,480

21. On January 1, 2019, Run Company sold a land and as consideration the entity received a 2,000,000
cash and a 5,000,000 non-interest bearing note due on January 1, 2022. There was no established
exchange price for land and the note had no ready market. The prevailing rate of interest for a note of
this type on January 1, 2019 was 10%. The present value of 1 at 10% for three period is 0.75.

What amount of interest revenue should be included in the 2019 income statement?
A. 2,050,000
B. 1,250,000
C. 1,350,000
D. 1,200,000

22. Which of the following describe the initial measurement of Accounts Receivable?
i. Accounts receivable shall be measured at fair value plus transaction cost thatare
directly attributable to the acquisition
ii. Accounts receivable shall be measured at net realizable value
iii. Accounts receivable shall be measured at face amount or original invoice
amount.

a. I and III. c. I and II

b. II and III d. III only

23. What is 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 bank prime interest rate

24. Which is not permitted in accounting for uncollectible accounts receivable

A. Percentage of accounts receivable
B. Percentage of sales
C. Direct writeoff method
D. Aging of accounts receivable

25. Aurora Company sold a factory on January 1, 2017 for P7,000,000. The entity received a cash down
payment of P1,000,000 and a 4-year, 12% note receivable for the balance. The note is payable in equal
annual payments of principal and interest of P1,975,400 payable on December 31 of each year until
2020.
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What is the carrying amount of the note receivable on December 31, 2017?
a. 4,500,000
b. 4,744,600
c. 4,624,600
d. 4,025,600

26. The balance sheet of Norman Company shows the accounts receivable balance at December 31, 2020
as follows:

Accounts receivable-trade 450,000

Allowance for doubtful accounts 9,000

During 2021, transactions relating to the accounts receivable were as follows:

Sales on account, P4, 800,000
Cash received from collections of current receivables totaled P3, 920,000, after discounts of P80,
000 were allowed for prompt payment.
Bad accounts previously written off prior to 2020 amounting to P5,000 were recovered.
The company decided to provide P26,000 for doubtful accounts by a journal entry at the end of
the year.
Accounts receivable of P700,000 have been pledge to a local bank on a loan of P400,000
Collections of P150, 000 were made on these receivables (not included in the collections
previously given) and applied as partial payment for the loan.

The net realizable value of accounts receivable at December 31, 2021 was
a. 1,065,000
b. 1,060,000
c. 1,070,000
d. 1,074,000

27. When promissory note matures and is not paid, it is said to be dishonoured. Dishonoured notes should
be:
a. Removed from notes receivable
b. Removed from notes receivable account and transferred to accounts receivable.
c. Removed from notes receivable and must be recorded as loss
d. Removed from notes receivable and must be ignored

28. On the February 1, 2022, New York Corporation factored receivables with a carrying of P2,000,000 to
Chicago Corporation. New York Corporation assesses a a finance charge of 3% of the receivables and
retains 5% of the receivables.

Question 1:
If the factoring is treated as a sale, what amount of loss from sale should the company report in its 2022
statement of comprehensive income for the year 2022?
a) none c) P100,000
b) P60,000 d) P160,000

Question 2:
Assume that New York Company retained significant amount of risk and rewards of ownership and had
a continuing involvement on the factored financial asset, what amount of loss from factoring should the
company recognize?
a) none c)P100,000
b) P60,000 d)P160,000

29. Maasim Company is a dealer in equipment. On December 31, 2018, the entity sold an equipment in
exchange for a non-interest bearing note requiring five annual payments of 500,000. The first
payment was made on December 31, 2019. The market interest for the similar notes was 8%. The PV of
1 at 8% for 5 periods is 0.68, and the PV of an ordinary annuity of 1 at 8% for 5 periods is 3.99.

1. On December 31, 2018, what is the carrying amount of the note?

a. 1,995,000
b. 1,740,000
c. 1,590,000
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d. 1,840,000

30. The following are the estimating doubtful accounts, except one.
a. Percentage of net credit sales
b. Percentage of receivables
c. Aging of receivables
d. Aging of sales