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Quiz - 5B 2

1. Paul Company sold goods to John Company on January 1, 2013. John issued a 5-year noninterest bearing note requiring annual payments of $400,000. The present value of the note payments is $1,616,000. 2. Glen Corporation sold a machine on December 31, 2013 for $75,000 that originally cost $135,000. The terms included a $15,000 down payment and two annual $30,000 payments. The notes receivable net of discount should be reported as $52,773. 3. Sad Bank reported a loan impairment loss of $420,000 on a loan to Happy Company as of December 31, 2011 because only the remaining principal will likely

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692 views

Quiz - 5B 2

1. Paul Company sold goods to John Company on January 1, 2013. John issued a 5-year noninterest bearing note requiring annual payments of $400,000. The present value of the note payments is $1,616,000. 2. Glen Corporation sold a machine on December 31, 2013 for $75,000 that originally cost $135,000. The terms included a $15,000 down payment and two annual $30,000 payments. The notes receivable net of discount should be reported as $52,773. 3. Sad Bank reported a loan impairment loss of $420,000 on a loan to Happy Company as of December 31, 2011 because only the remaining principal will likely

Uploaded by

Jao Flores
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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1.

On January 1, 2013, Paul Company sold goods to John Company in which John issued a
noninterest bearing note requiring annual payment of P400,000 for 5 years. The first payment
was made on January 1, 2013. The prevailing interest rate for this similar note is 12%. The
present value of an ordinary annuity of 1 for 5 periods at 12% is 3.60 while the present value for
an annuity due of 1 for 5 periods at 12% is 4.04. What total amount of sales revenue should be
recognized for 2013 in relation to the sale transaction?

A. 1,616,000 B. 2,000,000 C. 1,761,920 D. 1,584,000

2. On December 31, 2013, Glen Corporation sold for P75,000 an old machine having an original
cost of P135,000 and a book value of P60,000. The terms of the sale were as follows:

P15,000 down payment

P30,000 payable on December 31 each of the next two years

The agreement of sale made no mention of interest; however, 9% would be a fair rate for this
type of transaction. What should be the amount of the notes receivable net of the unamortized
discount on December 31, 2013 rounded to the nearest peso? (The present value of an ordinary
annuity of 1 at 9% for 2 years is 1.75911.)

A. 52,773 B. 67,773 C. 60,000 D. 105,546

3. Sad Bank loaned P5,000,000 to Happy Company on January 1, 2009. The terms of the loan
require principal payment of P1,000,000 each year for 5 years plus interest at 8%. The first
principal and interest payment is due on January 1, 2010. Happy Company made the required
payments during 2010 and 2011. However, during 2011 Happy Company began to experience
financial difficulties, requiring Sad Bank to reassess the collectability of the loan. On December
31, 2011, Sad Bank has determined that the remaining principal payment will be collected but
the collection of the interest is unlikely. Sad Bank did not accrue the interest on Dec. 31, 2011.
The present value of 1 at 8%

For one period 0.93


For two periods 0.86
For three periods 0.79
What is the loan impairment loss on Dec. 31, 2011?

A. P420,000 b. P210,000 c. P630,000 d. P0

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

I Direct loan origination cost incurred by the lender

II Indirect loan origination cost incurred by the lender

III Loan origination fees charged to the borrower

A. I only B . I & II only C. I & III only D. I, II & III only

5. If there is evidence that an impairment loss on loan receivable has been incurred, the amount
of the loss is equal to the

A. Excess of the carrying amount of the loan receivable over the present value of the cash flows
related to the loan.
B.Excess of the present value of cash flows related to the loan over the carrying amount of the
loan receivable.
C. Excess of the carrying amount of the loan over the principal amount of the loan.
D. Excess of the principal amount of the loan over its carrying amount
Question 6

Statement 1 Short term notes, interest bearing or non-interest bearing, are stated at
face value

Statement 2 Interest bearing long term notes shall be stated at face value

Statement 3 Non-interest bearing long-term notes shall be stated at discounted


value

A. All statements are true C. Only statement I is false


B. Only statement I is true D. Only statement II is true
7.If the adjusting entry to accrue interest on a note receivable is omitted

A. Assets, net income, and shareholders' equity are overstated


B. Assets, net income, and shareholders' equity are understated.
C. Liabilities are understated, net income is overstated, and shareholders' equity is overstated
D. Assets are overstated, net income is understated, and shareholders' equity is understated

8. Swiss Bank granted a loan to borrower on January 1, 2014. The interest in the loan is 10%
payable annually starting December 31, 2014. Data related to the loan are:

Principal amount 4,000,000

Origination fees charged to the borrower 352,100

Direct Origination Cost 150,000

After considering the origination fees against the borrower and the direct origination cost
incurred, the effective rate of the loan is 12%. Compute for the carrying amount of the loan as of
December 31, 2014.

9. On December 1, 2014, Tangle Mortgage Co. Gave Kelp Corp. A P 200,000 12% loan. Kelp
received proceeds of P194,000 after the reduction of P 6,000 non refundable loan origination
fee. Principal and interest are due in 60 monthly installments of P 4,450 beginning January 1,
2015. The repayments yeild an effective interest rate of P 12% at present value of P 200,000 and
13.4% at a present value of P 194,000. What amount of accrued interest receivable should
Tangle include in its December 31, 2014, Statement of financial position?

A. 4,450 B. 2,166 C. 2,000 D. 0

10. Berlin Company sold a tract of land to Germany Co. On July 1, 2010, for P 8,000,000 under an
installment sale contract. Germany Co, signed a 4-year 11% note for P 5,600,000 on July 1, 2010,
in addition to the down payment of P 2,400,000. The equal annual payments of principal and
interest on the note will be P 1805,000 payable on July 1,2011, 2012, 2013, 2014. The land had
an established cash price of P 8,000,0000, and its cost was P 6,000,000. The collection of the
note is reasonably assured. The current portion of the installment accounts receivable on
December 31, 2011 is

A. 1,805,000 B. P1,400,0000 C. P1,319,790 D. 1,189,0000

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