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
11.
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
borrowing or sale
b. The receivables are used as collateral for a promissory note
issued to the factor by the 12.
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
collection period of the
receivables
13.
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
a. I only
b. II only
c. Both I and II 14.
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

7. Notes receivable discounted with recourse should be

a. Included in total receivables with disclosure of contingent
liability 15. Note receivable discounted without recourse shall be
b. Included in total receivables without disclosure of contingent a. Excluded from total receivables without disclosure of
liability contingent liability
b. Excluded from total receivables with disclosure of contingent of the receivables of 54 days. The fair value of the
liability recourse obligation is P90,000.
c. Included from total receivables without disclosure of contingent
liability Assuming all receivables are collected, the corporation’s
d. Included from total receivables with disclosure of contingent cost of factoring the receivables would be:
liability ____________________________________________

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. 3. Dan Corporation received a P300, 000, 6-month,
VI. Selling costs. 12% interest bearing note from a customer. The note
a. II, III, IV, V was discounted the same day by Sea Bank at 15%.
b. III, IV, VI As a result of the discounting, it should recognize
c. I, II interest expense of:
d. II, III, IV, V, VI
________________________________________
17. Inventories are measured at
a. Lower cost and fair value.
b. Lower cost and net realizable value. 4. Jvion Company received from a customer a 1-year,
c. Lower cost and nominal value. P500, 000 note bearing annual interest of 8%.After
d. Lower cost and net selling price. holding the note for 6 months, it discounted the note
at a nearby bank at an effective interest rate of 10%.
18. Which of the following costs of conversion cannot be What amount of cash did it received from the bank?
included in the cost of inventory?
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
400,000 from a bank and pledged its receivable as
19. Inventories are assets ( Choose incorrect one) collateral. The interest worth 20,000 was deducted in
a. Held for sale in the ordinary course of business advance. Provide the journal entry:
b. In the process of production for sale
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? -NOTHING FOLLOWS-
a. Goods in transit purchased under FOB shipping point
b. Unsold goods out on consignment Key Answer
c. Goods given to prospective buyers under a sale on trial CCDCC
agreement ACDCC
d. Goods sold under installment sale whereby the entity CCCBA
retains legal title to protect the collectability of the sale price BBCDD

1. 80,000
PROBLEM SOLVING: 2. 313,150
3. 5,850
1. On January 1, Deliela Company assigned P500, 000 of 4. 513,000
accounts receivable to X Finance Inc. The company gave 5. Cash 380K
a 14% note for P450, 000 representing 90% of the Discount on LP 20K
assigned accounts and received proceeds of P432, 000 LP 400k
after deduction of a 4% fee. On February 1, it remitted
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