UNIVERSITY OF SANTO TOMAS

AMV COLLEGE OF ACCOUTANCY

INTERMEDIATE ACCOUNTING 1
RECEIVABLES

On April 10, 2016 Belgium Company sold merchandise with a list price of P 1,000,000 to
Germany Company. Belgium allowed trade discount of 10%. Credit terms were 2/10, n/30
and the sale was made FOB shipping point. Belgium paid P 20,000 of delivery cost.

1. How much should Belgium receive assuming Germany paid on April 18, 2016?
a. 882,000 c. 901,600
b. 902,000 d. 921,600

Poland Company uses the gross method of accounting for cash discounts. In one of its
transactions on December 15, 2016, Poland Company sold merchandise with a list price of
P2,000,000 to a client who was given a trade discount of 20% and 10%. Credit terms
given by Poland Company were 5/10, n/30. The goods were shipped FOB shipping point,
freight collect. Total freight charge paid by the client was P100,000.

On December 20, 2015, the client returned damaged goods originally billed at P200,000.

2. What is the amortized cost of this accounts receivable on Dec. 31, 2016?
a. 1,240,000 c. 1,168,000
b. 1,140,000 d. 1,068,000

Egypt Company accounts for cash discounts using the net price method. On December 12,
2016, Egypt Company sold merchandise with an invoice price of P500,000 to customer Cairo
with credit terms of 3/15, n/45. Cairo made a full payment on January 5, 2017.

3. How much is the accounts receivable balance on December 31, 2016?

a. 500,000 c. 450,000
b. 485,000 d. 0

The following transactions affecting the accounts receivable of Sweden Co. took place during
the year 2016:

Sales (cash and credit) P 600,000

Cash received from cash customers 200,000
Cash received from credit customers ( P237,650 was received
from customers who took advantage of the discount feature
of the company’s credit terms 3/10,n/30) 400,000
Accounts receivable written-off as worthless 5,000
Credit memoranda issued to credit customers for sales returns and allowances 25,000
Cash refunds given to cash customers for sales returns and allowances 15,000
Recoveries on accounts receivable written off as uncollectible in prior periods
( not included in cash collections above ) 8,500

An aging of receivables indicate that P 7,500 of the accounts receivable balance are deemed
uncollectible

The following balances were taken from the December 31, 2015 balance sheet: Accounts
Receivable- P 90,000; Allowance for bad debts- P 1,400

4. What is the accounts receivable ledger balance at December 31, 2016?

a. 60,000 c. 52,650
b. 61,150 d. 90,000

5. How much is the bad debts expense reported in the income statement for the
year ended December 31, 2016?
a. 4,900 c. 7,500
b. 2,600 d. 11,100

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Japan Company uses the balance sheet approach in estimating uncollectible accounts
expense. An aging analysis of accounts receivable at December 31, 2016 disclosed the
following information:

Age Group total %considered uncollectible

Not yet due P 500,000 1
1-30 days past due 300,000 3
31-60 days past due 100,000 10

6. What is the amortized cost of accounts receivable at December 31, 2016?

a. 19,000 c. 900,000
b. 24,000 d. 876,000

Kenya Company prepared an aging of its accounts receivable at December 31, 2016 and
determined that the estimated uncollectible on that date was P 85,000. During 2016, some
customers’ accounts were written off. Additional information is available as follows:

Allowance for bad debts at 12/31/15-credit balance P 63,000

Accounts written off 18,000
Accounts receivable at 12/31/16 600,000
Uncollectible accounts recovery during 2016 12,000

7. How much is the bad debts expense that should be reported in the income
statement for the year 2016?

a. 52,000 c. 28,000
b. 40,000 d. 85,000

Zimbabwe Company sold one of its machine on January 1, 2016 to Singapore Company in
exchange for a non-interest bearing note requiring five annual payments of P 500,000 or a
total of P 2,500,000. The machine had a carrying amount of P 1,750,000 in Zimbabwe’s
books. The first payment is due on December 31, 2016. The market interest for similar
notes was 10% and the relevant present value factors are:

PV of a single payment at 10% for 5 periods 0.621

PV of an ordinary annuity of 1 at 10% for 5 periods 3.791
PV of an annuity due of 1 at 10% for 5 periods 4.170

8. How much is the gain or loss on sale of machine?

a. 145,500 loss c. 750,000 gain
b. 145,500 gain d. 750,000 loss

9. How much is the interest income for the year 2016?

a. 250,000 c. 379,100
b. 139,550 d. 189,550

10.How much is the carrying value of the notes on December 31, 2016?
a. 2,000,000 c. 2,500,000
b. 1,585,050 d. 2,085,050

On January 1, 2015, Thailand Company sold a building for P 5,000,000 to Bangkok

Company. Bangkok Company paid P 500,000 down and signed a noninterest bearing note
for the balance which is payable in 3 equal annual installments every December 31 of each
year. The carrying value of the building is P4,200,000. Assume prevailing interest rate for a
note of this type is 12%. The present value of an ordinary annuity of 1 for three periods is
2.4018.

11.How much is the gain or loss on sale of building?

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 a. 597,300 c. 800,000
b. 97,300 d. 300,00

12.How much is the interest income for the year 2016?

a. 600,000 c. 432,324
b. 492,324 d. 540,000

13.How much is the carrying value of notes on December 31, 2016?

a. 3,000,000 c. 2,535,024
b. 3,602,700 d. 4,035,024

On January 1, 2015 Taiwan Company sold a tract of land for P 5,250,000 to Taipei
Company. Taipei Company paid P1,250,000 down and signed a noninterest bearing note for
the balance which is due on January 1, 2019. There was no established exchange price for
the land and the note had no ready market. The prevailing interest rate for this type of the
note was 12%.

14.How much is the interest income for the year 2016?

a. 305,040 c. 480,000
b. 341,645 d. 382,642
15.How much is the carrying value of the note on December 31, 2015?
a. 4,000,000 c. 2,847,040
b. 3,188,684 d. 2,542,000

Finland Corporation received from Helsinki company a 4-year, 12% note on January 1, 2016
for P500,000. in exchange for consultation services rendered. The fair value of the services
is not readily determinable and the note is not readily marketable. The note is considered
to have an appropriate imputed rate of interest of 10%. Annual interest is receivable every
December 31.

16.How much is the interest income for the year 2016?

a. 53,169 c. 63,803
b. 60,000 d. 50,000
17.How much is the carrying value of the note on December 31, 2016?
a. 500,000 c. 584,863
b. 531,694 d. 524,863

At the beginning of November, Norway Inc. assigned P4,000,000 out its P10,000,000
outstanding accounts receivable to Oslo Bank in consideration of a P3,000,000, 12% loan.
Oslo Bank charged the company 5% of the loan principal as service charge. By the end of
November, Norway collected P500,000 cash from the assigned accounts net of a P30,000
sales discount.

By the end of December, Norway collected another P900,000 from the assigned accounts
after P50,000 sales discount. The company wrote-off P100,000 of the assigned accounts as
worthless.

The agreement with Oslo calls for monthly remittance of customer collections for the month.
The collections will cover both interest and loan principal.

18.How much is the accounts receivable assigned balance on December 31 ?

a. 2,420,000 c. 2,580,000
b. 2,500,000 d. 4,000,000

On February 1, 2019, Italy Company factored receivables with a face amount of P300,000
to Rome Company. Rome Company assesses a finance charge of 3% of the receivables
and retains 5% of the receivables. Relative to this transaction, Italy factored the
receivables on a without recourse basis.

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19.How much is the proceeds and loss on sale arising from factoring of receivables?

a. 291,000; 0 c. 276,000; 0
b. 291,000; 9,000 d. 276,000; 9,000

On October 31, 2019 Austria Company engaged in the following transaction:

Obtained a P500,000, 6-month loan from Vienna discounted at 12%. The company pledged
P600,000 of accounts receivables as security for the loan.

Factored P1,000,000 of accounts receivable without recourse on a notification basis with

England finance company. England finance charged a factoring fee of 5% of the amount of
receivables factored and with the held 10% of the receivables factored.

20.What is the total cash received from financing?

a. 1,350,000 c. 1,290,000
b. 1,320,000 d. 1,500,000
21.How much receivable should be reported on December 31, 2019?

a. 0 c. 1,000,000
b. 600,000 d. 1,600,000

On July 1, 2019, Venezuela corporation sold (discounted) two, P40,000 interest-bearing

notes receivable to the Caracas Bank without recourse. Note A as a one-year, 10% note
that will mature on December 1, 2019. Note B was a six-month, 8% note that will mature
on October 31, 2019. The bank’s discount rate was 15%.

22.How much is the net proceeds from the discounting of Note A?

a. 44,000 c. 37,400
b. 40,150 d. 41,250

23.What is the gain or loss on the sale of the Note B?

a. 480 c. 1,546
b. 1,013 d. 0

On December 31, 2019 the Manila Finance Company had a P5,000,000 note receivable from
Osaka Company. The note bears 10% interest. The books reported accrued interest of
P500,000 on this date. Because of financial distress being suffered by Osaka company
Manila Finance agreed to the restricting and modification of the terms of its loan as follows:

Reduction of principal to P4,000,000 ; Reduction of interest to 8% payable annually

beginning December 31,2020; Accrued interest on December 31, 2019 is condoned and the
principal payment was reset to December 31, 2022.

24.How much impairment loss should Metro Finance record on December 31 201 9?

a. 1,198,992 c. 1,000,000
b. 1,500,000 d. 1,698,992

25.How much is the amortized cost at December 31, 202 0?

a. 3,861,109 c. 4,000,000
b. 3,801,008 d. 4,080,000

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