Problem Solving | Bank CO approved a loan application of Client ME on January 1, 20A for P3,500,000.

Client ME is required to pay 15% interest annually every December 31, from 20A until the principal is
extinguished. Client ME has to make an equal annual principal payment of its obligation to commence
December 31, 20A. An amount of P61,192 was paid by Client ME as its share from the origination fee
totaling P161,192, and the rest was shouldered by the bank resulting to a 14.50% new effective interest
rate. On December 31, 20A, the non-current portion of the loan receivable is

Answer:

Question 2
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Problem Solving. On January 1, 200A, ABC Company sells to XYZ, a used transportation equipment,
which was acquired at P800,000, 5 years ago. The carrying value of the equipment is P500,000. There is
no established selling price for the equipment. Upon executing the sale, ABC received P100,000 down
payment and a non-interest bearing, 3 year promissory note amounting to 400,000, when the interest rate
prevailing in the market is 12%. At the end of December 200B, the carrying value of the current portion of
note receivable is (Round off the initial amount ONLY to the nearest hundreds.)

Answer:

Question 3
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Problem Solving | On December 31, 2025, the “Receivables” account of AA. Company show a debit
balance of P5,950,000 Subsidiary details show the following: Accounts receivable, P725,000; Loans
receivable, P100,000; Instalments receivable, normally due 1 year to two years, P300,000; Customers’
accounts reporting credit balances arising from sales returns, P30,000; Advance payments for purchase of
merchandise, P150,000; Customers’ accounts reporting credit balances arising from advance payments,
P20,000; Cash advances to subsidiary, P400,000; Claim from insurance company, P15,000; Subscription
receivable due in 60 days, P300,000; Subscription receivable due to shares subscribed by stockholders in
2024, due 2027 – P1, 300,000; Accrued interest receivable, P10,000, Deposit on contract bids, P3,000,000
and Advances to shareholders (collectible in 2024), P1,000,000. The Accounts receivable included the cost
of P400,000 worth of merchandise sold shipped in the afternoon of December 2025, FOB shipping point.
How much is the amount to be presented as “trade and other receivables” under current assets section of
the balance sheet?
Problem Solving. ML Company acquired 20% equity interest in an associate, OL Company, for P5,650,000
on January 1, 20B. At the acquisition date, there were no differences between fair value and carrying
amount of identifiable assets and liabilities. OL Company reported the following net income and dividend
for 20B and 20C:
Net Income 20B - 3,750,000
Net Income 20C - 4,050,000
Dividend paid 20B - 1,800,000
Dividend paid 20C - 1,200,000
The following transactions occurred between ML Company and OL Company:
• On January 1, 20B, OL Company sold a transportation equipment costing 500,000 to ML Company for
P600,000. The remaining useful life of the transportation equipment is estimated to be 5 years which will be
depreciated using straight line.
• On December 15, 20B, OL sold an inventory costing P1,000,000 at a 20% mark up. All of these were sold
during 20C.
• On July 1, 20C, OL Company sold a service vehicle to ML for P1,100,000. The carrying amount of the
service vehicle at the date of sale is P800,000. ML applies 25% annual depreciation for this equipment.
On November 1, 20C, OL Company sold an inventory to ML for P1,000,000, costing P800,000. Half of
these were sold during 20C, and the remaining during 2020. The carrying value of the investment with
significant influence by the end of 20B is

Answer:

Question 5
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Problem Solving | ABC Company provided some information on their financial records on December 31,
2025: Accounts receivable, beginning - 1,920,000; Collections of account receivable - 6,240,000; Allow for
Bad debts, beg - 200,000; Inventory , January 1 - 2,880,000; Inventory , December 31 - 2,640,000;
Accounts payable, January 1 - 1,000,000; Accounts payable, December 31 - 1,500,000; Cash sales -
1,200,000; Purchases - 4,800,000; Gross Profit on sales - 2, 160,000; Percentage of doubtful accounts
expense based on credit sales is 2.5%, percentage for allowance of freight is 0.5% of credit sales, and
1.5% for expected returns. During the year, P275,000 worth of accounts receivables were written off and
recorded properly. Determine the net realizable value of accounts receivable on December 2025

Answer:

Question 6
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Problem Solving. On January 1, 200A, ABC Company sells to XYZ, a used transportation equipment,
which was acquired at P800,000, 5 years ago. The carrying value of the equipment is P500,000. There is
no established selling price for the equipment. Upon executing the sale, ABC received P100,000 down
payment and a 12% promissory note which gives the holder the right to collect 150,000 annually starting
December 200A until December 200C, when the interest rate prevailing in the market is 13%. At the end of
December 200A, the carrying value of the noncurrent portion of note receivable is (Round off the initial
amount ONLY to the nearest hundreds.)
Problem Solving. On January 1, 2026, ABC purchased serial bonds (to be held by collecting contractual
cash flows representing principal and interest) with face amount of P10M and stated interest at 12%. The
stated interest is payable annually on December 31. The bonds are acquired to have an effective yield at
13%. The bonds mature at annual installment of P2,500,000 every December 31 starting 2026. Determine
the amount of the investment to be shown in the financial position statement when the market value at the
reporting period is P7,450,000.

Answer:

Question 8
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Problem Solving | ABC Company’s record shows December 31 balance of P2,350,000 for its accounts
receivable. The following may be considered for adjustments, if necessary:
• Client X has paid its accounts payable to ABC for purchase of merchandise amounting P120,000. Two
days after the full payment was made, Client X returned some of the goods due to wrong delivery, which
amounts to P35,000, which resulted to Client X’s subsidiary ledger to have a negative 35,000 balance.
ABC’s bookkeeper offset the amount from other accounts with debit balance.
• Goods at a selling price of P200,000 was shipped before the end of the year under FOB Destination
shipping term. Such amount was already recorded by ABC as sales for the period but at P220,000. On
January 5, the customer informed ABC that they’ve just received the goods.
• A customer’s check amounting to P75,000 was received a day before year-end to be applied to its
account. The check was dated January 7 and it was applied by ABC upon receipt of the check.
• A credit sales amounting to P50,000 dated December 30 was recorded on the same day at P5,000.
• A cash sales for January 1 amounting to P23,500 was recorded on December because the book was held
open up to January 15.
• A customer’s check was returned by the bank on January 2 marked NSF. Such check was received from
the customer on December 29 and was recorded. The amount indicated is P15,000.
• A check amounting to P25,000, dated December 30 was received, recorded but undeposited.
What is the adjusted balance of accounts receivable as of year-end?

Answer:

Question 9
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Problem Solving. A promissory note which is dated October 1, 20A was received from a client for service
delivered by the ML Company for P450,500. Its term is 90 days and carries with it an 12% interest. On
November 15, 20A, due to financial difficulty, ML company have the client’s promissory note discounted to
a C19 Financing even at 18% discount. Pertaining to this transaction alone, compute the net amount of
increase in profit assuming the bank was paid by its client on the said due date. Although we assume 360
days a year, use the actual number of days of each month mentioned.
Problem Solving. ML Company acquired 20% equity interest in an associate, OL Company, for P5,650,000
on January 1, 20B. At the acquisition date, there were no differences between fair value and carrying
amount of identifiable assets and liabilities. OL Company reported the following net income and dividend
for 20B and 20C:
Net Income 20B - 3,750,000
Net Income 20C - 4,050,000
Dividend paid 20B - 1,800,000
Dividend paid 20C - 1,200,000
The following transactions occurred between ML Company and OL Company:
• On January 1, 20B, OL Company sold a transportation equipment costing 500,000 to ML Company for
P600,000. The remaining useful life of the transportation equipment is estimated to be 5 years which will be
depreciated using straight line.
• On December 15, 20B, OL sold an inventory costing P1,000,000 at a 20% mark up. All of these were sold
during 20C.
• On July 1, 20C, OL Company sold a service vehicle to ML for P1,100,000. The carrying amount of the
service vehicle at the date of sale is P800,000. ML applies 25% annual depreciation for this equipment.
On November 1, 20C, OL Company sold an inventory to ML for P1,000,000, costing P800,000. Half of
these were sold during 20C, and the remaining during 2020. The carrying value of the investment with
significant influence by the end of 20C is

Answer:
Question 11
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Problem Solving. A company pledged its entire accounts receivable amounting to P2,500,000 to a
financing institution to a loan approved for P2,000,000. The term of the loan requires the company to
equally pay the principal in 4 installments starting June 30, 20B and also to pay 12% annual interest on the
same date the principal is due. Should the company has made no collateral for the loan, interest rate could
go up to 24%. If the transaction occurred on July 1, 20A, compute the total amount of expense that should
be deducted from the company’s income on December 31, 20B.

Answer:

Question 12
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Problem Solving. On January 1, 200A, ABC Company sells to XYZ, a used transportation equipment,
which was acquired at P800,000, 5 years ago. The carrying value of the equipment is P400,000. There is
no established selling price for the equipment. Upon executing the sale, ABC received P100,000 down
payment and an 11% 3 year promissory note amounting to P450,000, when the interest rate prevailing in
the market is 12%. At the end of December 200A, how much is the total amount of income that should be
shown in ABC’s income statement. (Round off the initial amount ONLY to the nearest hundreds.
Problem Solving | On January 1, 2021, ABC Bank loaned P2,000,000 to a borrower. The contract specified
that the loan had an 8-year term and a 10% interest rate. Interest is payable annually every December 31
and the principal amount will be collected on December 31, 2028. Interest is collected for 2021. On
December 31, 2021, the bank determined that the loan has a 12-month probability of default of 20% and
expected to collect only 92% of the loan. On December 31, 2022, the bank determined that there is a
significant increase in the credit risk of the loan but no objective evidence of impairment. Based on the
relevant information, the bank concluded that there is a 30% probability of default over the remaining term
of the loan and it is expected that only 65% of the loan will be collected. Interest is collected for 2022. On
December 31, 2023, the borrower was under financial difficulty and the loan was considered impaired. The
bank agreed that only 60% of the principal will be collected on due date. Interest is collected for 2023.
Round off present value factor to 4-decimal places. Compute the interest income on the year 2024.

Answer:

Question 14
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Problem Solving | On January 1, 2021, ABC Bank loaned P2,000,000 to a borrower. The contract specified
that the loan had an 8-year term and a 10% interest rate. Interest is payable annually every December 31
and the principal amount will be collected on December 31, 2028. Interest is collected for 2021. On
December 31, 2021, the bank determined that the loan has a 12-month probability of default of 20% and
expected to collect only 92% of the loan. On December 31, 2022, the bank determined that there is a
significant increase in the credit risk of the loan but no objective evidence of impairment. Based on the
relevant information, the bank concluded that there is a 30% probability of default over the remaining term
of the loan and it is expected that only 65% of the loan will be collected. Interest is collected for 2022. On
December 31, 2023, the borrower was under financial difficulty and the loan was considered impaired. The
bank agreed that only 60% of the principal will be collected on due date. Interest is collected for 2023.
Round off present value factor to 4-decimal places. Compute the impact of the assessment to profit or loss
for the year ended 2023.

Answer:

Question 15
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Problem Solving. ABC Company has acquired debt and equity instruments. Both instruments are
irrevocably designated as Financial Assets at Fair Value Through Other Comprehensive Income
(FAFVTOCI). The debt instruments have a face value of P500,000, 4 years term, with 10% stated interest
but the prevailing rate in the financial market at the time the were acquired is 9%. Twenty thousand equity
shares, with P20 par value, were acquired by ABC at P25 incurring transaction cost of P15,000. Interest on
debt instruments were received on December 31 when the market value is at 101%. The market value of
the equity shares was quoted at P27 per share. During the year, how much is the net impact to ABC’s
comprehensive income as a result of acquiring both instruments. (Round off answer to nearest peso and
indicate Increased or Decreased)
Problem Solving | On January 1, 20A, Bank Net has an outstanding loan receivable from Client Tel totaling
P4,320,000, inclusive of 8% interest. Client Tel has not able to pay the interest due last year which made
Bank Net to consider the related loan impaired. As a result, Bank Net projected that the principal can still
be collected but equally in 20B and 20C of December. The interest which was accrued is projected to be
collectible still but fully on December 31, 20C. In addition, the interest rate is lowered to 4% of the
outstanding amount which Client Tel is expected to pay annually starting December 20A. Assuming the
projection was realized, how much is the carrying value of the loan receivable on December 31, 20B?

Answer:

Question 17
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Problem Solving. ABC Company has acquired debt and equity instruments. Both instruments are
irrevocably designated as Financial Assets at Fair Value Through Other Comprehensive Income
(FAFVTOCI). The debt instruments have a face value of P500,000, 4 years term, with 10% stated interest
but the prevailing rate in the financial market at the time the were acquired is 9%. Twenty thousand equity
shares, with P20 par value, were acquired by ABC at P25 incurring transaction cost of P15,000. Interest on
debt instruments were received on December 31 when the market value is at 101%. The market value of
the equity shares was quoted at P27 per share. During the year, how much is the net unrealized gain or net
unrealized loss from the holdings? (Round off answer to nearest peso and label your answer UG or UL)

Answer:

Question 18
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Problem Solving. On January 1, 20A, AA Company purchased 50,000 shares of BB Company at P150 per
share. Brokerage fees amounted to P125,000. A P2.50 dividend per share on December 30 of the previous
year, payable on February 28, 20A to shareholders of record on January 15, 20A. On March 31, 20A, a
30% share dividend was declared and immediately distributed by BB Company when the carrying amount
per share on BB’s book was P150 and the market value per share was P120. On May 31, 5,000 shares
were sold at P118, and incurred P10 selling cost per share. After a month, BB Company issued rights to all
shareholders allowing them to subscribe to its stock, the ownership of 10 shares entitling the shareholders
to subscribe for an additional 2 shares at P100 a share. On such date, BB’s market value per share was
P118 and P12 per right. AA’s receipt of the stock rights was accounted separately. On July 15, 30,000
rights were sold at P15 a right and the remaining were formally exercised. At the end of the month of July,
the BODs of BB Company passed a resolution to the effect that the shareholders shall contribute P7.5 for
each share held to BB Company followed by a declaration of 2-for-4 share split on July 15. On October 1,
AA Company receives 5,000 shares in lieu of P50 cash dividend and the market value per BB’s share on
that date cannot be reliably determined. A quarter of the shares held by AA Company was sold at P199.50
by the end of 20A. AA used the AVERAGE method. The balance of the investment in unquoted securities
by the balance sheet date December 31, 20A is (Round off answer to nearest peso)
Problem Solving | Bank CO approved a loan application of Client ME on January 1, 20A for P3,500,000.
Client ME is required to pay 15% interest annually every December 31, from 20A until the principal is
extinguished. Client ME has to make an equal annual principal payment of its obligation to commence
December 31, 20A. An amount of P61,192 was paid by Client ME as its share from the origination fee
totaling P161,192, and the rest was shouldered by the bank resulting to a 14.50% new effective interest
rate. On December 31, 20B, the current portion of the loan receivable is

Answer:

Question 20
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Problem Solving. ABC Company has acquired debt and equity instruments intended for trading. The debt
instruments were acquired at P450,000 (P500,000 face, 5% P.A.) incurring P10,000 transaction cost while
the equity instruments were acquired for P675,000 (P500,000 par) including P25,000 transaction cost.
During the year, an annual interest is received. The quoted price of the debt instruments by this time is
101% while that of the equity instruments is P625,000. During the year, how much is the net impact to the
profit or loss as a result of acquiring both instruments. (Round off answer to nearest peso and indicate
Increased or Decreased)

Answer:

Question 21
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Problem Solving | ABC is a leading educational institution with student population of more than 50,000.
ABC continuously maintains good quality of education and a good roster of qualified instructors. As a
result, ABC continuously produces top graduates at several fields. As at December 31, 2024, ABC has an
outstanding accounts receivable balance of P100,000,000 broken down into : 0-60 days outstanding,
P50,000,000; 61-120 days outstanding, P30,000,000; and over 120 days outstanding, P20,000,000.
Estimated uncollectible accounts are 2%, 5% and 10% respectively. ABC wrote off P2,500,000 of its
accounts receivable and recovered P500,000 from accounts previously written off in prior years. As at
December 31, 2023, ABC has an allowance for uncollectible accounts of P3,000,000. Based on the aging
analysis, ABC should report net realizable value of its accounts receivable as at December 31, 2024 at
Problem Solving. On January 1, 20A, AA Company purchased 50,000 shares of BB Company at P150 per
share. Brokerage fees amounted to P125,000. A P2.50 dividend per share on December 30 of the previous
year, payable on February 28, 20A to shareholders of record on January 15, 20A. On March 31, 20A, a
30% share dividend was declared and immediately distributed by BB Company when the carrying amount
per share on BB’s book was P150 and the market value per share was P120. On May 31, 5,000 shares
were sold at P118, and incurred P10 selling cost per share. After a month, BB Company issued rights to all
shareholders allowing them to subscribe to its stock, the ownership of 10 shares entitling the shareholders
to subscribe for an additional 2 shares at P100 a share. On such date, BB’s market value per share was
P118 and P12 per right. AA’s receipt of the stock rights was accounted separately. On July 15, 30,000
rights were sold at P15 a right and the remaining were formally exercised. At the end of the month of July,
the BODs of BB Company passed a resolution to the effect that the shareholders shall contribute P7.5 for
each share held to BB Company followed by a declaration of 2-for-4 share split on July 15. On October 1,
AA Company receives 5,000 shares in lieu of P50 cash dividend and the market value per BB’s share on
that date cannot be reliably determined. A quarter of the shares held by AA Company was sold at P199.50
by the end of 20A. AA used the AVERAGE method. On May 1, 20A, the sale resulted to an amount

of Answer  Gain or Loss (Round off answer to nearest peso and label you answer)

Question 23
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Problem Solving. On January 1, 20A, AA Company purchased 50,000 shares of BB Company at P150 per
share. Brokerage fees amounted to P125,000. A P2.50 dividend per share on December 30 of the previous
year, payable on February 28, 20A to shareholders of record on January 15, 20A. On March 31, 20A, a
30% share dividend was declared and immediately distributed by BB Company when the carrying amount
per share on BB’s book was P150 and the market value per share was P120. On May 31, 5,000 shares
were sold at P118, and incurred P10 selling cost per share. After a month, BB Company issued rights to all
shareholders allowing them to subscribe to its stock, the ownership of 10 shares entitling the shareholders
to subscribe for an additional 2 shares at P100 a share. On such date, BB’s market value per share was
P118 and P12 per right. AA’s receipt of the stock rights was accounted separately. On July 15, 30,000
rights were sold at P15 a right and the remaining were formally exercised. At the end of the month of July,
the BODs of BB Company passed a resolution to the effect that the shareholders shall contribute P7.5 for
each share held to BB Company followed by a declaration of 2-for-4 share split on July 15. On October 1,
AA Company receives 5,000 shares in lieu of P50 cash dividend and the market value per BB’s share on
that date cannot be reliably determined. A quarter of the shares held by AA Company was sold at P199.50
by the end of 20A. AA used the AVERAGE method. The initial amount of the investment in unquoted
securities is (Round off answer to nearest peso)

Answer:

Question 24
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Problem Solving. ABC has an accounts receivable with a gross amount of P150,000 and 2% allowance to
be doubtful. ABC sold this account to nC20 Finance Inc for 95% of the carrying value of accounts
receivable under a casual agreement. nC20 also charges a factoring fee and commission of 2% of the
carrying value. Determine the amount to be recognized as loss from factoring
Problem Solving. On January 1, 20A, AA Company purchased 50,000 shares of BB Company at P150 per
share. Brokerage fees amounted to P125,000. A P2.50 dividend per share on December 30 of the previous
year, payable on February 28, 20A to shareholders of record on January 15, 20A. On March 31, 20A, a
30% share dividend was declared and immediately distributed by BB Company when the carrying amount
per share on BB’s book was P150 and the market value per share was P120. On May 31, 5,000 shares
were sold at P118, and incurred P10 selling cost per share. After a month, BB Company issued rights to all
shareholders allowing them to subscribe to its stock, the ownership of 10 shares entitling the shareholders
to subscribe for an additional 2 shares at P100 a share. On such date, BB’s market value per share was
P118 and P12 per right. AA’s receipt of the stock rights was accounted separately. On July 15, 30,000
rights were sold at P15 a right and the remaining were formally exercised. At the end of the month of July,
the BODs of BB Company passed a resolution to the effect that the shareholders shall contribute P7.5 for
each share held to BB Company followed by a declaration of 2-for-4 share split on July 15. On October 1,
AA Company receives 5,000 shares in lieu of P50 cash dividend and the market value per BB’s share on
that date cannot be reliably determined. A quarter of the shares held by AA Company was sold at P199.50
by the end of 20A. AA used the AVERAGE method. After receipt of stock rights, the carrying value of the
investment in unquoted securities is (Round off answer to nearest peso)

Answer:

Question 26
Not yet answered
Marked out of 1.00
Problem Solving. On January 1, 20A, AA Company purchased 50,000 shares of BB Company at P150 per
share. Brokerage fees amounted to P125,000. A P2.50 dividend per share on December 30 of the previous
year, payable on February 28, 20A to shareholders of record on January 15, 20A. On March 31, 20A, a
30% share dividend was declared and immediately distributed by BB Company when the carrying amount
per share on BB’s book was P150 and the market value per share was P120. On May 31, 5,000 shares
were sold at P118, and incurred P10 selling cost per share. After a month, BB Company issued rights to all
shareholders allowing them to subscribe to its stock, the ownership of 10 shares entitling the shareholders
to subscribe for an additional 2 shares at P100 a share. On such date, BB’s market value per share was
P118 and P12 per right. AA’s receipt of the stock rights was accounted separately. On July 15, 30,000
rights were sold at P15 a right and the remaining were formally exercised. At the end of the month of July,
the BODs of BB Company passed a resolution to the effect that the shareholders shall contribute P7.5 for
each share held to BB Company followed by a declaration of 2-for-4 share split on July 15. On October 1,
AA Company receives 5,000 shares in lieu of P50 cash dividend and the market value per BB’s share on
that date cannot be reliably determined. A quarter of the shares held by AA Company was sold at P199.50
by the end of 20A. AA used the AVERAGE method. On July 15, 20A, the cost of the new shares is (Round
off answer to nearest peso)

Answer:

Question 27
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Problem Solving. AAA has a receivable from Client QRC amounting to P850,000 with existing credit term of
10/45, n/60. This was used by AAA to avail financing from C19 Finance Corporation. Client QRC is one of
AAA’s credible client for the longest time which is its basis why this account was assigned to the finance
provider. C19 has only extend 85% of the amount with 2% finance fee based on the face receivable
assigned. A monthly interest of 4% will be charged by on the outstanding obligation of AAA. As this
transaction was completed, AAA notified the finance department of QRC to pay its account directly to C19.
Assuming AAA sold merchandise to Client QRC on April 1, 20A and the assignment transaction was
completed on April 15, 20A. If Client QRC has paid its entire receivables availing the discount, of the
amount received by the bank, which of the following entries is not found when the AAA was notified of the
collection and the excess cash was received?
a.
Dr. Cash 82,733
b.
Dr. Sales discount 85,000
c.
Loan payable 680,000
d.
Interest expense 2,267
e.
Cr. Accounts receivable 850,000