UNIVERSITY OF SAN JOSE – RECOLETOS

SCHOOL OF BUSINESS AND MANAGEMENT

FINANCIAL ACCOUNTING AND REPORTING
RECEIVABLES and INVESTMENTS

Questionnaire

1. Which of the following is true regarding the scope eventual recipients for the obligation to pay
set by PFRS 9? them cash flows.
a. rights and obligations arising under an c. The entity has an obligation to remit any
insurance contract as defined in IFRS 17 cash flows it collects on behalf of the
Insurance Contracts are all not in-scope of eventual recipients without material delay.
PFRS 9 including derivatives that are d. Short-term advances by the entity with the
embedded in contracts within the scope of right of full recovery of the amount lent plus
IFRS 17. accrued interest at market rates violates the
b. employers’ rights and obligations under transfer principle of financial instruments.
employee benefit plans, to which IAS 19
Employee Benefits applies are in scope of 4. Which of the following statements are false?
PFRS 9. a. Financial asset (FA) is measured at
c. Recognition of finance lease receivables amortized cost if the FA is held within a
(i.e. net investments in finance leases) and business model that hold financial assets in
operating lease receivables recognized by a order to collect contractual cash flows.
lessor are not in-scope of PFRS 9. b. FA is measured at FVPL if the FA is held
d. contracts to buy or sell a non-financial item within a business model that achieves by
that cannot be settled net in cash, or another both collecting contractual cash flows and
financial instrument are in scope of PFRS 9, selling financial assets.
regardless of its nature of noncash c. A contract that requires or permits net
settlement. settlement of the change in the value of the
contract is a regular way contract, it will be
2. Which of the following is false? accounted not as a derivative but as a
a. An entity shall recognize a financial asset or normal financial asset transaction without
a financial liability in its statement of hedging.
financial position when, and only when, the d. All the above.
entity becomes party to the contractual
provisions of the instrument. 5. Which of the following is false regarding expected
b. A regular way purchase or sale of financial credit losses?
assets shall be recognized and a. When measuring expected credit losses, an
derecognized, as applicable, using only the entity needs to identify every possible
trade date accounting. scenario.
c. Derecognition of financial assets happens b. The maximum period to consider when
when the contractual rights to the cash flows measuring expected credit losses is the
from the financial asset expire. maximum contractual period (including
d. The transfer of risks and rewards is extension options) over which the entity is
evaluated by comparing the entity’s exposed to credit risk and not a longer
exposure, before and after the transfer, with period, even if that longer period is
the variability in the amounts and timing of consistent with business practice.
the net cash flows of the transferred asset. c. Financial instruments with loan an undrawn
commitment and the entity’s contractual
3. When an entity retains the contractual rights to ability to demand
receive the cash flows of a financial asset (the repayment and cancel the undrawn
‘original asset’), but assumes a contractual commitment does not limit the entity’s
obligation to pay those cash flows to one or more exposure to credit losses to the contractual
entities (the ‘eventual recipients’), the entity treats notice period.
the transaction as a transfer of a financial asset if all d. All the above.
the conditions are met. Which is not the condition to
be met?
a. The entity has no obligation to pay amounts
to the eventual recipients unless it collects
equivalent amounts from the original asset.
b. The entity is prohibited by the terms of the
transfer contract from selling or pledging the
original asset other than as security to the
6. The Company must measure its expected credit d. Without recourse, secured borrowing – no
losses of a financial instrument in a way that it gain or loss recognized in profit or loss
reflects?
a. unbiased and probability-weighted amount 11. Which of the following is false regarding the transfer
that is determined by evaluating a range of of risks and rewards of the Company?
possible outcomes a. if the entity transfers substantially all the
b. time value of money risks and rewards of ownership of the
c. reasonable and supportable information that financial asset, the entity shall derecognize
is available without undue cost or effort at the financial asset and recognize the assets
the reporting date about past events, current or liabilities as a single line item in the
conditions and forecasts of future economic financial statements regarding the rights and
conditions. obligations created or retained in the
d. All the above transfer.
b. if the entity retains substantially all the risks
7. If an entity reclassifies a financial asset out of the and rewards of ownership of the financial
amortized cost measurement category and into the asset, the entity shall continue to recognize
fair value through other comprehensive income the financial asset.
measurement category, its fair value is measured at c. if the entity neither transfers nor retains
what date and where does the gain or loss will be substantially all the risks and rewards of
recognized? ownership of the financial asset, the entity
a. Reclassification date; Statement of Income shall determine whether it has retained
b. Reclassification date; Other Comprehensive control of the financial asset.
Income d. None of the above.
c. Purchase date; Statement of Income
d. Purchase date; Other Comprehensive 12. Interest income for the financial assets are
income. computed using the gross carrying amount
multiplied by the effective interest rate. Which of the
8. A gain or loss on a financial asset or financial liability following financial asset uses the gross effective
that is measured at fair value shall be recognized in interest rate?
profit or loss unless, which of the following is false? a. purchased or originated credit-impaired
a. It is part of hedging relationship. financial assets
b. Investment in an equity instrument and the b. financial assets that are not purchased or
entity has elected to present gains and originated credit-impaired financial assets
losses on that investment in other but subsequently have become credit-
comprehensive income. impaired financial assets.
c. Financial liability designated as at fair value c. financial assets that are not purchased or
through profit or loss and the entity is originated credit-impaired financial assets.
required to present the effects of changes in d. None of the above
the liability’s credit risk in other
comprehensive income. 13. Which of the following is true regarding expected
d. None of the above. credit losses?
a. an entity shall measure the loss allowance
9. When does the dividends be recognized at profit or for a financial instrument at an amount
loss? different from the lifetime expected credit
a. the entity’s right to receive payment of the losses if the credit risk on that financial
dividend is established. instrument has increased significantly since
b. it is probable that the economic benefits initial recognition.
associated with the dividend will flow to the b. The objective of the impairment
entity. requirements is to recognize lifetime
c. the amount of the dividend can be measured expected credit losses for all financial
reliably. instruments for which there have been
d. All the above minimal to no significant increases in credit
risk since initial recognition.
10. Which of the following is not the proper recognition c. For loan commitments and financial
of effect of factoring or discounting of receivables? guarantee contracts, the date that the entity
a. With recourse – gain or loss recognized in becomes a party to the irrevocable
profit or loss commitment shall not be considered to be
b. With recourse – no gain or loss recognized the date of initial recognition for the
in profit or loss purposes of applying the impairment
c. Without recourse, conditional sale – with
gain or loss recognized in profit or loss
 require ments since it does not reflect d. Excluded in total receivables without
the business model intended for these disclosure of contingent liability.
financial instruments.
d. If at the reporting date, the credit risk on a 15. Which of the following statements is correct?
financial instrument has not increased a. The net realizable value of the total amount
significantly since initial recognition, an of accounts receivable is defined as the
entity shall measure the loss allowance for gross amount billed to customers less any
that financial instrument at an amount equal cash and trade discounts.
to 12-month expected credit losses. b. When a specified uncollectible account
which has already been written off is later
14. Notes receivable discounted with recourse should collected sales revenue is increased by the
be: amount of the recovery.
a. Included in total receivables with disclosure c. The primary accounting principle supporting
of contingent liability. use of the allowance for doubtful account is
b. Included in total receivables without the cost principle.
disclosure of contingent liability. d. An estimate of doubtful accounts expense
c. Excluded in total receivables with disclosure based upon credit sales rather than total
of contingent liability. sales will likely be more in conformity with
the matching principle.

Problems (Receivables):

The accounts receivable of VMC COMPANY were stated at P = 1,467,000 in a balance sheet submitted to a banker for
credit. You are called upon to audit the report and, upon analysis, the asset was found to consist of the following items:

Due from customers on open account P

= 1,125,000.00
Acknowledged claim for damages 22,500.00
Due from consignee at billed price – cost price being P22,500 30,000.00
Investment in and advances to affiliated company 150,000.00
Loans to officers and employees 13,500.00
Deposits with municipalities – bids for contracts 67,500.00
Unpaid capital stock subscriptions 60,000.00
Advances to creditors for merchandise purchased but not received 24,000.00
Cash advanced to salesmen for traveling expenses 4,500.00
Allowance for doubtful accounts (30,000.00)
Total P
= 1,467,000.00

The amount of P
= 1,125,000 due from customers was the remaining balance after deducting accounts with credit balances
of P
= 6,000.

During your examination, you noted that on December 31, the company assigned P = 300,000 of customers’ accounts to
secure a 17%, P= 240,000 note payable. A 1% commission based on the accounts assigned was charged and deducted
from the cash received. The client recorded this transaction by a debit to cash and a credit to notes payable.

1. How much is the Accounts Receivable (gross) balance at December 31?

a. P
= 759,000
b. P
= 789,000
c. P
= 1,101,000
d. P
= 1,131,000

2. The total current non-trade receivable balance at December 31 is:

a. P
= 64,500
b. P
= 96,000
c. P
= 120,000
d. P
= 92,000

3. The liability for the accounts receivable – assigned is:

a. P
= 237,000
b. P
= 240,000
c. P
= 243,000
d. P
= 300,000
4. The total non-trade receivable balance at December 31 is
a. P
= 342,000
b. P
= 318,000
c. P
= 313,500
d. P
= 245,000

For Questions 5 to 10, refer below.

The following selected transactions occurred during the year ended December 31, 2024 of CBY Company:

Gross sales (cash and credit) P

= 900,736.80
Collections from credit customers, net of 2% cash discount 294,000.00
Cash sales 180,000.00
Uncollectible accounts written off 19,200.00
Credit memos issued to credit customers for sales ret./allow. 10,080.00
Cash refunds given to cash customers for sales ret./allow. 15,168.00
Recoveries on accounts receivable written-off in prior years
(not included in cash received stated above) 6,505.20

At year-end, the company provides for estimated bad debts losses by crediting the Allowance for Bad Debts account for
2% of its net credit sales for the year. The allowance for bad debts at the beginning of the year is P
= 19,327.20.

5. How much is the CBY COMPANY’s gross sales?

a. P
= 900,736.80
b. P
= 720,736.80
c. P
= 704,656.80
d. P
= 689,488.80

6. CBY COMPANY’s credit sales at December 31, 2024 is:

a. P
= 900,736.80
b. P
= 720,736.80
c. P
= 704,656.80
d. P
= 689,488.80

7. How much is the CBY COMPANY’s net credit sales?

a. P
= 900,736.80
b. P
= 720,736.80
c. P
= 704,656.80
d. P
= 689,488.80

8. The Bad Debts Expense of CBY COMPANY at December 31, 2024 is:
a. P
= 20,725.54
b. P
= 14,093.14
c. P
= 8,030.74
d. P
= 7,829.14

9. The Accounts Receivable of CBY COMPANY at December 31, 2024 is:

a. P
= 408.042.00
b. P
= 407,536.80
c. P
= 401,536.80
d. P
= 391,456.80

10. The Allowance for Bad Debts of CBY COMPANY at December 31, 2024 is:
a. P
= 20,725.54
b. P
= 14,093.14
c. P
= 8,030.74
d. P
= 7,829.14
For Questions 11 to 14, refer below.

During December 2024, the Accounts Receivable controlling account on the books of MDTS COMPANY showed one
debit posting and two credit postings. The debit represents receivables from December sales, P
= 780,000. One credit was
for P
= 470,400, made a result of cash collections on November and December receivables; the second credit was an
adjustment for estimated uncollectible, P
= 90,000. The December 31 balance was P = 270,000.

When receivables were collected, the bookkeeper credited Accounts Receivables for the cash collected. All customers
who paid their accounts during December took advantage of the 2% cash discount.

As of December 1, debit balance in customers’ subsidiary accounts totaled P

= 177,000. An adjustment for estimated
doubtful accounts of P
= 18,000 had been posted to the Accounts Receivable controlling account at the end of 2020, and no
write-offs were recorded during 2024. In addition, a number of customers had overpaid their accounts, and as a result,
some of the customers’ subsidiary accounts had credit balances on December 1. No overpayments were made during
December nor were any credit balances in customers’ accounts reduced during December.

11. The Accounts Receivable beginning balance (unadjusted) of MDTS COMPANY at December 31, 2024 is:
a. P
= 50,400
b. P
= 68,400
c. P
= 252,000
d. P
= 270,000

12. The Accounts Receivable beginning balance (adjusted) of MDTS COMPANY at December 31, 2024 is:
a. P
= 50,400
b. P
= 68,400
c. P
= 252,000
d. P
= 270,000

13. The Credit Balance of Accounts Receivable at the beginning of the year of MDTS COMPANY is:
a. P
= 48,600
b. P
= 66,600
c. P
= 108,600
d. P
= 126,600

14. The Accounts Receivable balance of MDTS COMPANY at December 31, 2024 is:
a. P
= 50,400
b. P
= 68,400
c. P
= 252,000
d. P
= 270,000

For Questions 15 to 20, refer below.

You are examining the financial statements of MAB CORPORATION for the year ended December 31, 2024. During the
audit of the accounts receivable and other related accounts, certain information was obtained.

The December 31, 2024 debit balance in the Accounts Receivable control account is P
= 197,000.

The only entries in the Bad Debts Expense account were:

• Credit for P = 324 on December 31, 2024, because Marlisa Company remitted in full for the accounts charged off
October 31, 2024
• Debit on December 31, 2024 for the credit to the Allowance for Doubtful Accounts.

The Allowance for Doubtful Accounts schedule is presented below:

Debit Credit Balance

January 1, 2024 P
= 3,658.00
October 21, 2024, Uncollectible;
Marlisa Co., - P
= 324; Abonales Co.,
-P
= 820; Cherryl Co., - P
= 564 P
= 1,508.00 2,150.00
December 31, 2024, 5% of P = 197,000 P
= 9,850.00 P
= 12,000.00
An aging schedule of the accounts receivable as of December 31, 2024 and the decision are shown in the table below:

Amount to which the

Net Debit Allowance is to be adjusted
Age
Balance after adjustments and
corrections have been made
0 – 1 month P
= 93,240.00 1%
1 – 3 months 76,820.00 2%
3 – 6 months 22,180.00 3%
Definitely uncollectible, P
= 1,000;
P
= 2,000 is considered 50%
over 6 months 6,000.00
uncollectible; the remainder is
estimated to be 80% collectible.

There is a credit balance in one account receivable (0-1 month) of P= 2,000; it represents an advance on a sales contract.
Also, there is a credit balance in one of the 1-3 months accounts receivable of P = 500 for which merchandise will be
accepted by the customer.

The ledger accounts have not been closed as of December 31, 2024. The Accounts Receivable control account is not in
agreement with the subsidiary ledger. The difference cannot be located, and the auditor decides to adjust the control to
the sum of the subsidiaries after corrections are made.

15. The adjusted balance of accounts receivable of MAB CORPORATION at December 31, 2024 is:
a. P
= 199,740
b. P
= 199,540
c. P
= 198,300
d. P
= 198,100

16. The adjusted write-off of accounts receivable balance of MAB CORPORATION at December 31, 2024 is:
a. P
= 2,708.00
b. P
= 2,508.00
c. P
= 2,384.00
d. P
= ,708.00

17. The adjusted allowance of bad debts account of MAB CORPORATION at December 31, 2024 is:
a. P
= 4,980.60
b. P
= 4,964.20
c. P
= 4,780.60
d. P
= 4,764.20

18. The bad debts expense per book of MAB CORPORATION at December 31, 2024 is:
a. P
= 9,850.00
b. P
= 6,359.80
c. P
= 4,764.20
d. Cannot be determined

19. The adjusted bad debts expense of MAB CORPORATION at December 31, 2024 is:
a. P
= 3,814.20
b. P
= 3,614.20
c. P
= 3,490.20
d. P
= 2,814.20

20. The net realizable value of accounts receivable of MAB CORPORATION at December 31, 2024 is:
a. P
= 194,975.80
b. P
= 194,775.80
c. P
= 193,335.80
d. P
= 193,319.40
For Questions 21 to 24, refer below.

MKP CORPORATION purchases the accounts receivable of other companies on a without recourse, notification basis. At
the time the receivables are factored, 15% of the amount factored is charged to the client as commission and recognized
as revenue in MKP’S books. Also, 10% of the receivables factored is withheld by MKP as protection against sales returns
or other adjustments. This amount credited by MKP to the client Retainer account. At the end of each month, payments
are made by MKP to its clients so that the balance in the Client Retainer account is equal to 10% of unpaid factored
receivables. Based on MKP’s bad debt loss experience, an allowance for bad debts of 5% of all factored receivables is to
be established, MKP makes adjusting entries at the end of each month.

On January 3, 2024, JPC Company factored its accounts receivable totaling P

= 1,000,000. By January 31, P
= 800,000 on
these receivables had been collected by MKP.

21. The commission earned of MKP Corporation from JPC Company’s accounts receivable factored is:
a. P
= 150,000
b. P
= 120,000
c. P
= 135,000
d. P
= 90,000

22. The proceeds received by JPC Company on the accounts factored is:
a. P
= 810,000
b. P
= 780,000
c. P
= 765,000
d. P
= 750,000

23. How much is the Client Retainer account of MKP Corporation at January 31, 2024 is:
a. P
=0
b. P
= 20,000
c. P
= 60,000
d. P
= 80,000

24. How much is the bad debts expense of MKP Corporation at January 31, 2024 is:
a. P
= 50,000
b. P
= 40,000
c. P
= 20,000
d. P
=0

Problems (Investments):
For Questions 25 to 29, refer below.

The INVESTMENT account, as of December 31, 2024, appearing in the records Pacioli CORPORATION is as follows:

Date Particular Debit Credit

1-Jan Balance 188,300.00
31-Jan Sold Ventanilla Stock 21,364.00
31-Mar Bought Don Dave Common 12,125.00
30-Jun Dividend on Suson Common 10,000.00
31-Jul Sold Suson Common 8,750.00
31-Aug Sold Jasmin bonds 22,083.00
30-Sep Interest on Sucuahi Mortgage 500.00

The audit working papers of the preceding year show that the account balances as of January 1, 2023, consisted of the
following:

Ventanilla Company – Common

• 1,000 shares, purchased in June 2013 at P
= 20 per share, P
= 20,000.
• 2,000 shares, purchased in August 2015 at P= 16 per share, P
= 32,000.
• 1,500 shares, purchased in May 2018 at P
= 22 per share, P= 33,000
Don Dave Company – Common
• 2,000 shares. Purchased in January 2019 at P
= 33 per share, P
= 66,000

Suson Company – Common

• 100 shares purchased in August 2019 at P
= 73 per share, P
= 7,300

Jasmin Company 5% bonds

• 2 bonds, P
= 10,000 each purchased in July 2017 at par, P
= 20,000 (Interest dates February 1 and August 1).

Sucuahi Company chattel mortgage on machinery

• 5, P= 10,000 mortgage taken in September 2020 in settlement of a receivable, P
= 10,000

Your examination discloses the following information:

▪ In January 2023, 1,000 shares of the Ventanilla company common stock purchased in May 2022 were sold for
P
= 21,364 net.
▪ In March 2023, 500 shares of Don Dave common stock were purchased at P = 24 per share plus brokerage, for
P
= 12,125.
▪ In June 2023, the Suson Company paid a 100% stock dividend on common.
▪ In July 2023, Paciolo CORPORATION sold to its president, for P = 125 per share, 100 shares of Suson common
stock, for which the president gave his check for P
= 8,750 and a letter in which he agreed to pay the balance upon
demand of the treasurer of Pacioli CORPORATION.
▪ On August 2023, the Jasmin Company redeemed its 5% bonds at 110 plus accrued interest.
▪ In September 2023, Pacioli CORPORATION received one year interest on the P = 10,000 chattel mortgage of
Sucuahi.

25. The adjusted balance of Gain or Loss of Sale/Redemption on Investment at December 31, 2023 is:
a. P
= 8,214
b. P
= 10,214
c. P
= 10,850
d. P
= 10,714

26. The adjusted balance of Investment at December 31, 2023 is:

a. P
= 157,728
b. P
= 155,411
c. P
= 154,775
d. P
= 152,692

27. Investment in Ventanilla Company common stock at year-end is:

a. P= 65,000
b. P= 63,000
c. P= 63,636
d. P= 52,000

28. Investment in Don Dave Company common stock at year-end is:

a. P= 78,125
b. P= 66,000
c. P= 61,625
d. P= 49,500

29. Investment in Suson Company common stock at year-end is:

a. P= 7,300
b. P= 3,650
c. P= 2,500
d. P= 1,450
For Questions 30 to 35, refer below.

Vina Company has a fiscal year ending June 30. A summary of Vina’s transactions in the capital stocks of Han Sohee
Company is presented below, except for several cash dividends that have no bearing on the situation. In all transactions,
Han Sohee Company uses the specific certificate identification method.

The transactions in the Investment of Han Sohee Company common stock are as follows:

Sept 06, 2016 Purchased 500 shares of Han Sohee Company common, par P
= 100 per share, at a total cost of P
= 48,500.

July 15, 2019 Converted 500 shares of Han Sohee Company preferred stock into 500 shares of Han Sohee Company
common, in accordance with the conversion privilege. The preferred shares originally cost P
= 49,000, and the market price
at conversion date was P
= 95 per share. The market price of the common stock at July 15, 2019, was P = 101 per share. The
transactions had no commercial substance.

Aug. 07, 2021 Received additional shares of Han Sohee Company common in a two-for-one stock split, in which the par
value was reduced from P
= 100 to P
= 50 per share.

Sept. 06, 2021 Purchased 1,000 share of Han Sohee Company common at a total cost of P
= 53,000.

Dec. 04, 2021 Exercised the option to receive Vina share of common for each 10 shares held, in lieu of a cash dividend
of P
= 5.40 for each share held. The market price of a share was P
= 54.

Dec. 02, 2022 Received stock dividend equal to 20 percent of the common shares held.

Apr. 04, 2023 Received warrants representing the right to purchase at par Vina share of Han Sohee Company common
for each ten shares of common owned. On that date of the issuance of the warrants, the market price of the stock ex-
rights was P
= 58, and the market price of the rights was P
= 2 each.

Apr. 15, 2023 Vina Company exercised the 1,000 rights applicable to the shares purchased on September 6, 2021, and
sold all remaining rights. The net proceeds from the sale of the rights was P
= 1.80 per right.

June 12, 2023 Sold 600 shares of Han Sohee Company common for P = 32,400 net. The shares were identified as 500 of
those purchased on September 6, 2021, and 100 of those purchased April 15, 2023.

30. The cost of shares purchased through exercise of rights on April 15, 2007 is:
a. P
= 6,473
b. P
= 6,391
c. P
= 5,000
d. P
= 3,527

31. Gain on sale of the rights is:

a. P= 1,761
b. P= 1,473
c. P= 1,294
d. P= 1,244

32. Gain on sale of the stocks is:

a. P= 5,900
b. P= 4,636
c. P= 4,580
d. P= 3,844

33. The audited balance of investment in common stock at December 31, 2007 is:
a. P
= 139,796
b. P
= 138,344
c. P
= 95,081
d. P
= 89,344
34. The number of rights Vina Company received from Han Sohee Company is:
a. 39,600 rights
b. 30,000 rights
c. 3,960 rights
d. 3,000 rights

35. The cost of the rights received is:

a. P
= 4,897
b. P
= 5,507
c. P
= 5,557
d. P
= 6,890