1.

In all of the following instances, except one, transfer of accounts receivable cannot be recorded as sale,
determine the exception.
a. The transferee cannot pledge or sell transferred accounts receivable to another entity.
b. The transferor maintains continuing involvement on the receivables.
c. The transferor has kept effective control over the transferred accounts receivable through repurchase
agreement.
d. The transferred accounts receivable are beyond the reach of the transferor and the creditors.

2. Tanjiro Inc. factored an accounts receivable to a bank on a with-recourse, with-notification basis. The recourse
obligation is deemed other than insignificant. Which of the following is the proper accounting for the transaction?
a. Receivable financing should be recognized as a sale, recognizing the difference between the factoring
proceeds against the face value of the loan as outright loss on factoring.
b. Receivable financing should be recognized as a sale, recognizing the difference between the factoring
proceeds plus any factor’s holdback against the face value of the loan as interest expense.
c. Receivable financing should be recognized as a loan, recognizing the difference between the factoring
proceeds plus any factor’s holdback less the estimated recourse obligation against the face value of the loan as
outright loss on the factoring.
d. Receivable financing should be recognized as a loan, recognizing the difference between the factoring
proceeds plus any factor’s holdback against the face value of the loan as interest expense.

3. Which of the following statements are true?

Statement 1: An aged receivables analysis often analyses customers by the age of their invoices.

Statement 2: In an aged receivables analysis, customer invoices are often analysed in terms of the balances
being due for 30+days, 60+days and 90+days.

Statement 3: An aged receivable analysis is a useful tool when a business reviews the credit limits that should be
offered to existing customers.

Statement 4: A year-end aged receivables analysis is included in the financial statements.

a. 1 and 2 c. 1, 2 and 3
b. 1 and 3 d. all statements are true

4. The Demon Slayer Corp.’s Trade Receivables which amounted to P4,100,000 included the following items as of
December 31, 2024.

Accounts know to be worthless 50,000

Advanced payments to creditors on purchase orders 200,000
Advances to associates and subsidiaries 500,000
Customer’s accounts reporting credit balances arising from sales returns (300,000)
Interest receivable on loans receivable 200,000
Trade accounts receivable 1,750,000
Subscriptions receivable due in 60 days 750,000
Trade accounts receivable – factored to a bank on a “without recourse” basis 200,000
Trade notes receivable – discounted to a bank on a “with recourse basis”, where 150,000
recourse obligation is deemed significant
Trade installment receivable due 1-18 months including Unearned finance 425,000
charge of P25,000
Trade accounts receivable from officers, due currently 75,000
Trade accounts on which post-dated checks are held 100,000
What is the correct balance of the Trade Receivables as of December 31, 2024?
a. 2,500,000 c. 2,400,000
b. 2,475,000 d. 2,375,000

5-6 Nezuko Company had the following account balances as of December 31, 2023:
Accounts Receivable P950,000
Allowance for doubtful accounts 47,500

The following is a summary of transactions that may have an effect on the accounts receivable in 2024:

Sales – all on account (5/10, 2/15, n/60) P5,335,000

Cash received from customers 5,020,000
Accounts written-off as worthless 58,000
Credit memo for sales returns (before collection) 30,000

The cash received from customers included the following:

Collections within the 10 day discount period 2,090,000

Collections within the15 day discount period 1,068,200
Recovery of previously written-off accounts 22,000
Collections beyond cash discount period ?

5. Assuming that the company uses the gross method to account for cash discounts, what is the correct accounts
receivable balance as December 31, 2024?

a. 1,177,000 c. 1,067,200
 b. 1,045,200 d. 1,199,000

6. Assuming that the company uses the gross method to account for cash discount for cash discount, what is the
correct bad debt expense for the year, assuming that there was no change in the policy of providing the required
allowance for bad debt (that is as a percentage of the outstanding receivable balance at each year-end)?

a. 47,350 c. 40,760

b. 48,450 d. 41,860

7. The following information were lifted from Zenitsu records for the current year:

Accounts receivable, January 1 970,000

Allowance for doubtful accounts on January 1 100,000
Total credit sales for the year 2,500,000
Accounts collected during the year, including recovery 2,250,000
of a P45,000 previously written-off account
Cash discount taken by customers 25,000
Account receivable deemed to be worthless during the 150,000
year

What is the adjusted balance of the accounts receivable as of December 31, 2024?

a. 1,115,000 c. 1,070,000

b. 1,160,000 d. 1,090,000

8. At 31 December 2024 Inosuke Co’s receivables totaled P400,000 and an allowance for receivables of P50,000
had been brought forward from the year ended 31 December 2023. It was decided to write off irrecoverable debts
totaling P38,000. The allowance for receivables was to be adjusted to the equivalent of 10% of the receivables.
What change for receivables expense should appear in Inosuke Co’s statement of profit or loss for the year
ended 31 December 2024?
a. P74,200 c. P28,000
b. P51,800 d. P24,200

9. At 1 July 20x3 the receivables allowance of Giyu was P18,000. During the year ended 30 June 20x4
irrecoverable debts totaling P14,600 were written off. The receivables allowance required was to be P16,000 at
30 June 20x4. What amount should appear in Giyu’s statement of profit or loss for receivables expense for the
year ended 30 June 20x4?
a. P12,600 c. P48,600
b. P16,600 d. P30,600

10. The following information were lifted from Muzan records for the currents year:

Accounts receivable, January 1 790,000

Allowance for doubtful accounts on January 1 35,625
Total credit sales for the year 2,950,000
Amount collected during the year, including recovery of a P24,000 2,590,000
previously written-off account
Cash discount taken by customers 52,000
Accounts receivable deemed to be worthless during the year 64,000

Additional information:
40% of accounts receivable balances is 60 days old and is 98% collectible. 35% is 61-120 days old and is 95%
collectible. The balance is more than 120 days old and is 90% collectible.

What is the correct bad debt expense for 2024?

a. P56,952 c.P58,164
b. P60,952 d.P62,164

11. Which of the following should be recorded as Accounts Receivable?

a. Receivables from officers

b. Receivables from subsidiaries
c. Dividend receivable
d. Sale of goods to a customer on account

12. Which of the following transactions will decrease the recorded accounts receivable?
a. Sale of goods on account
b. Collection of accounts previously written off
c. Return of goods sold to a customer on account
d. Cash discount availed using the net method

13. Shinobu Company gets 2% of the total peso balance of accounts aged as 1-60 days past due and adds this to
5% of the total peso balance of accounts aged 61-120 days past due. The total amount computed represents the
a. amount of uncollected accounts expense for the year.
b. amount that should be added to the allowance for uncollectible accounts at year end.
 c. amount of the desired credit balance of the allowance for uncollectible accounts to be reported
in the year-end financial statements
d. amount to be added to the total accounts written off during the year to arrive at the desired credit
balance of the allowance account.

14. When the allowance method of recognizing uncollectible account expense is used, the entries at the time of
collection of an account that was previously written off would
a. Increase profit
b. Increase the amortized cost of accounts receivable
c. Decrease profit
d. Decrease the amortized cost of accounts receivable

15. If Rengoku Co. will write-off the receivable from a bankrupt customer, and the balance of the allowance before
this write-off is greater than the amount to be written off, the effect of the write-off will
a. Have no effect on total current assets
b. Reduce net income for the period
c. Reduce total current assets
d. Reduce the amount of total equity

16. Factor’s holdback

a. Is considered loss under casual factoring
b. Is retained to cushion for sales discounts, returns and allowances
c. Is prohibited when the factoring is non-notification basis
d. All the choices describe factor’s holdback

17. Pledge transactions,

a. Are accounted for by segregating the pledged receivables from the other receivables through a journal
entry
b. Are disclosed only
c. None of the choices are correct
d. Are not allowed when the business is not into trading

18. Tengen Company sold P5,800,000 in accounts receivable for cash of P5,00,000. The factor withheld 10% of
the cash proceeds to allow for possible customer returns and other adjustments. An allowance for doubtful
accounts of P600,000 had previously been established by the entity in relation to these accounts. What amount of
loss on factoring should be recognized?
a. P200,000 c. P500,000
b. P700,000 d. P800,000

19-20 Mitsuri Company factored without recourse P2,000,000 of accounts receivable with a bank. The finance
charge is 3% and 5% was retained to cover sales discounts, sales returns and sales allowances.

19. What amount of cash was received on the sale of accounts receivable?
a. P1,940,000 c. P1,840,000
b. P1,900,000 d. P2,000,000
20. What amount should be recognized as loss on factoring?
a. P100,000 c. P60,000
b. P160,000 d. 0

21-22 At the beginning of current year, Obanai Company had a credit balance of P260,000 in the allowance for
uncollectible accounts. Based on past experience, 2% of credit sales would be uncollectible. During the current
year, the entity wrote off P325,000 of uncollectible accounts. Credit sales for the year totaled P9,000,000.

21. What amount should be reported as uncollectible accounts expense for the year?
a. P325,000 c.P440,000
b. P180,000 d.P65,000

22. What amount should be reported as allowance for uncollectible accounts at year-end?
a. P115,000 c. P245,000
b. P180,000 d. P440,000

23. A credit balance in accounts receivable resulting from overpayments, advanced payments and sales returns
should be classified as (customers’ credit balance)
a. A current liability c. A contra asset
b. A long-term liability d. A note disclosure

24. On September 1, 2021 KKK Corp. discounted a P1,200,000, 9%, 12-month note receivable dated June 1,
2021 to BDO Banking Inc. The agreed upon discount rate was 12%. Assuming the discounting was done on a
with recourse basis, and that the estimated recourse obligation which was deemed not significant was at P20,000,
what is the gain or loss to be recognized from the transaction?
a. None c. P36,720
b. P16,720 d. P56,720

25. Determine which of the following statements is false?

a. Accounts receivable are initially measured at invoice price, meaning it should be ALWAYS net of trade
discount.
b. Allowance for freight charge will only appear if the entitys shipping terms is FOB Destination, Freight
Collect
c. Of the methods to record cash discounts, gross method is more theoretically correct.
 d. When an entity is using allowance method of recognizing uncollectible accounts, the entry to record the
write-off of a specific account would have an effect to both accounts receivable and allowance for doubtful
accounts.
26. On July 1 of the current year, an entity received a one-year note receivable bearing interest at the market rate.
The face amount of the note receivable and the entire amount of the interest are due on June 30 of next year. The
interest receivable account would show a balance on.

a. July 1 but not December 31 of the current year

b. December 31 but not July 1 of current year.
c. July 1 and December 31 of the current year
d. Neither July 1 nor December 31 of the current year

27. In calculating the carrying amount of loan receivable, the lender adds to the principal

a. Direct loan origination cost incurred by the lender

b. Indirect loan origination cost incurred by the lender
c. Loan origination fee charged to the borrower
d. Interest incurred by the borrower

28. A loan receivable shall be measured subsequently at

a. Cost
b. Amortized cost using the straight-line method
c. Amortized cost using the effective interest method
d. Fair value

29. On June 1, 2020, Charity Company loaned P500,000 on a 12% note, payable in
five equal annual installments of P100,000 beginning January 1, 2021. Interest
on the note is payable on the first day of each month beginning July 1, 2020.
The borrower made timely payments through November 1, 2020. On January 1,
2021, the entity received payment of the first principal installment plus all
interest due. On December 31, 2020, what amount should be reported as
accrued interest receivable?
a. 120,000
b. 10,000
c. 12,000
d. 80,000
30. For the year end December 31, 2020, what amount should be reported as interest income for this note?
a. 35,000
b. 60,000
c. 85,000
d. 45,000

31. Charitable Bank granted a 10-year loan to Chaste Company in the amount ofP1,500,000 with a stated interest rate of
6%. Payments are due monthly and are computed to be P16,650. Charitable Bank incurred P40,000 of direct
loan origination cost and P20,000 of indirect loan origination cost. In addition, the bank charged Chaste Company a 4%
nonrefundable loan origination fee. What is the initial carrying amount of the loan receivable to reported by Charitable
Bank?

a. 1,480,000
b. 1,500,500
c. 1,648,500
d. 1,648,000
The December 31, 2022, statement of financial position of the UPAT COMPANY included the following information:
Based on the preceding information, determine the balances of the following accounts at December 31, 2023.

32. Accounts receivable

A. P473,718 B. P509,400 C. P513,975 D. P515,475
33. Allowance for doubtful accounts
A. P39,357 B. P40,800 C. P40,857 D. P41,757
34. Notes receivable
A. P59,400 B. P194,400 C. P200,400 D. P329,400
35. Notes receivable discounted
A. P114,000 B. P120,000 C. P129,000 D. P135,000

36. On January 1, 2023, an entity received from its customer a P2,000,000, 8%, five-year note that required five equal
annual payments of P500,900. The note was discounted to yield a 9% rate to the entity. On January 1, 2023, the entity
recorded the note at the present value of P1,948,500. What is the carrying amount of the note on December 31, 2024?

a. 1,499,100
b. 1,268,132
c. 998,200
d. 1,622,965

37. An entity sold goods on terms 2/10, net 30. The entity had no cash sales but 40% of the customers took advantage of
the discount. The entity used the gross method of recording sales and accounts receivable. An analysis of the accounts
receivable at year-end revealed the following:
Age Amount Uncollectible
0 – 10 days 3,000,000 0%
11 – 25 days 1,600,000 5%
26 – 60 days 500,000 15%
Over 60 days 300,000 50%
Which of the following statements is / are true?
Statement 1: Accounts receivable is subsequently measured at gross amount.
Statement 2: The required allowance for doubtful accounts amounts to P305,000.
Statement 3: The net realizable value of accounts receivable amounts to P5,095,000.
a. All statements are true.
b. Statement 2 only is true.
c. Statements 2 and 3 are true.
d. Statements 1 and 2 are true.

38. An entity factored accounts receivable without recourse for P10,600,000. The entity received P10,000,000 cash
immediately from the factor. The remaining P600,000 shall be received once the factor has verified that none of the
accounts is in dispute. The accounts receivable had a face amount of P12,000,000 and the entity previously established
an allowance for doubtful accounts of P500,000 in connection with such account. Which of the following statements is /
are false?
Statement 1: Factoring of accounts receivable transfers ownership of the accounts receivable to the factor.
Statement 2: The selling price from the factoring amounts to P10,000,000.
Statement 3: The loss on factoring is P900,000.
a. All statements are false. c. Statement 2 is false.
b. Statements 2 and 3 are false. d. Statement 3 is false.

During your audit of the LEILANI COMPANY for the calendar year 2006, you find the following accounts:

All notes are trade notes receivable unless otherwise specified. The Samson note was paid December 31, 2006. Interest
income is credited only upon receipt of cash.

39. The accrued interest income at December 31, 2006 is:

a. P 2,748 b. P 3,018 c. P 3,120 d. P 4,200
40. The interest expense at December 31, 2006 is:
a. P 1,875.00 b. P 2,185.50 c. P 4,060.50 d. P 11,560.50
41. The Notes Receivable at December 31, 2006 is:
a. P 141,000 b. P 159,000 c. P 216,000 d. P 252,000
42. The Notes Receivable – discounted at December 31, 2006 is:
a. P 63,750 b. P 73,125 c. P 75,000 d. P 111,000
43. How much is the proceeds in the discounting of notes receivable for the year?
a. P 99,439.50 b. P 100,060.50 c. P 111,000.00 d. P 111,310.50

On January 1, 2006, TUQUIB COMPANY 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%.
44. The gain or loss on the sale of equipment is: a. P 40,000 b. P 122 c. P 0 d. (P 17,644)
45. The discount on notes receivable is: a. P 57,644 b. P 40,000 c. P 39,878 d. P 0
46. The discount amortization at the end of the second year using the effective-interest amortization is: a. P 17,083 b.
P 19,133 c. P 21,428 d. P 36,216

On January 2, 2006, a tract of land that originally cost P800,000 was sold by MAYLENE CORPORATION. The
company received a P1,200,000 note as payment. It bears interest rate of 4% and is payable in 3 annual
installments of P400,000 plus interest on the outstanding balance. The prevailing rate of interest for a note of
this type is 10%.
47. The gain on sale of land on January 2, 2006 is: a. P 194,740 b. P 276,847 c. P 290,740 d. P 400,000
48. The interest income on the note receivable for the year ended December 31, 2006 using
effective interest method is:
a. P 120,000 b. P 109,074 c. P 107,685 d. P 99,474
49. How much cash will MYLENE CORPORATION received from notes receivable?
a. P 1,076,847 b. P 1,200,000 c. P 1,296,000 d. P 1,476,847

50. A 60-day note receivable dated June 13 has a maturity date of

a. August 13.
b. August 12.
c. August 11.
d. August 10.
51. The maturity value of a $90,000, 10%, 60-day note receivable dated July 3 is
a. $90,000.
b. $99,000.
c. $105,000.
d. $91,500.

52. . A company that receives an interest-bearing note receivable will

a. debit Notes Receivable for the maturity value of the note.
b. credit Notes Receivable for the maturity value of the note.
c. debit Notes Receivable for the face value of the note.
d. credit Notes Receivable for the face value of the note

53. Mega Company purchased from Ora Company a P2,000,000, 8% 5-year note that required
five equal annual year-end payments of P500,900. The note was discounted to yield a 9%
rate to Mega. At the date of purchase, Mega recorded the note at its present value of
P1,948,500. What should be the total revenue earned by Mega over the life of this note?
(a) P504,500 (b) P556,000 (c) P800,000 (d) P900,000

54. National Bank grants a 10-year loan to Abbo Company in the amount of P1,500,000 with a
stated interest rate of 6%. Payments are due monthly and are computed to be P16,650.
National Bank incurs P40,000 of direct loan origination cost and P20,000 of indirect loan
origination cost. In addition, National Bank charges Abbo a 4-point nonrefundable loan
origination fee.
National Bank, the lender, has a carrying amount of:
(a) P1,440,000 (b) P1,480,000 (c) P1,500,000 (d) P1,520,000

55. Roth Company received from a customer a 1 – year, P500,000 note bearing annual interest
of 8%. After holding the note for 6 months, Roth discounted the note at a nearby bank at
an effective interest rate of 10%. What amount of cash did Roth received from the bank?
(a) P540,000 (b) P523,810 (c) P513,000 (d) P495,238
56. X Corporation factored P6,000,000 of accounts receivable to A Corporation on October 1,
2004. Control was surrendered by X Corporation. A Corporation accepted the receivables
subject to recourse for nonpayment. A Corporation assessed a fee of 3% and retains a
holdback equal to 5% of the accounts receivable. In addition, A Corporation 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.
X Corporation will receive and record cash of:
(a) P5,296,850 (b) P5,386,850 (c) P5,476,850 (d) P5,556,850

57. Assuming all receivables are collected, X Corporation’s cost of factoring the receivables
would be:
(a) P313,150 (b) P180,000 (c) P433,150 (d) P613,150

58. Trade receivables are classified as current assets if reasonably expected to be collected
a. Within one year
b. Within the normal operating cycle
c. Within one year or the normal operating cycle, whichever is longer
d. Within one year or the normal operating cycle, whichever is shorter

59. Credit balances in accounts receivable are classified as

a. Current liabilities
b. Part of accounts payable
c. Long term liabilities
d. Deduction from accounts receivable

60. When the allowance method is used, the entry to record the write-off of a specific account
would
a. Increase accounts receivable
b. Increase doubtful accounts expense
c. Decrease allowance for doubtful accounts
d. Decrease cash