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LR and Other Receivables Concepts Activities

The document contains 14 multiple choice questions related to accounting for loans receivable, notes receivable, and factoring transactions. The questions cover topics such as calculating interest income, impairment loss, gain or loss on derecognition of financial assets, proceeds from factoring and discounting receivables.

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Athena Fatmah Ampuan
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68 views4 pages

LR and Other Receivables Concepts Activities

The document contains 14 multiple choice questions related to accounting for loans receivable, notes receivable, and factoring transactions. The questions cover topics such as calculating interest income, impairment loss, gain or loss on derecognition of financial assets, proceeds from factoring and discounting receivables.

Uploaded by

Athena Fatmah Ampuan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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ACTIVITY: Loans Receivable

1. On January 1, 20x1, ABC Bank extended a 12%, ₱1,000,000 loan to XYZ, Inc. Principal is due on
January 1, 20x5 but interests are due annually every January 1. ABC Bank incurred direct loan
origination costs of ₱88,394 and indirect loan origination costs of ₱18,000. In addition, ABC Bank
charged XYZ a 2.5-point nonrefundable loan origination fee. How much is the interest income in
20x2?
a. 104,973
b. 105,364
c. 106,339
d. 136,661

Use the following information for the next two questions:


On January 1, 20x1, ABC Bank extended a ₱900,000 loan to XYZ, Inc. Principal is due on December 31,
20x5 but 12% interest is due annually every December 31.

On December 31, 20x3, XYZ, Inc. was delinquent and it was ascertained that the loan is impaired. ABC
Bank assessed that interests accruing on the loan will not be collected; however, the principal is expected
to be received in three equal annual installments starting on December 31, 20x4. Accrued interest
receivable on December 31, 20x3 amounted to ₱100,000. The current market rate on December 31, 20x3 is
14%.

2. How much is the balance of allowance for impairment loss on December 31, 20x3 immediately after
impairment testing?
a. 279,460
b. 303,510
c. 203,510
d. 179,460

3. How much is the interest income in 20x5?


a. 86,465
b. 64,810
c. 60,841
d. 0

Use the following information for the next two questions:


On January 1, 20x1, ABC Co. received a ₱1,000,000 note receivable from XYZ, Inc. Principal payments of
₱200,000 and interest at 12% are due annually at the end of each year for 5 years. The first payment starts
on December 31, 20x1.

XYZ, Inc. made the required payments during 20x1 and 20x2. However, during 20x3 XYZ, Inc. began to
experience financial difficulties, requiring ABC Co. to reassess the collectability of the note on December
31, 20x3. Because of the loss event, ABC Co. did not accrue the interest on December 31, 20x3. The current
rate of interest on December 31, 20x3 is 10%. ABC Co. made the following cash flow projections on
December 31, 20x3:

Date of expected receipt Amount of cash flow


January 1, 20x4 200,000
January 1, 20x5 150,000
January 1, 20x6 150,000

4. How much is the impairment loss recognized in 20x3?


a. 146,492
b. 195,082
c. 139,669
d. 181,518

5. How much is the interest income in 20x4?


a. 54,421
b. 30,421
c. 16,071
d. 0

Use the following information for the next two questions:


ABC Co. transfers loans receivable with a fair value of ₱500,000 and carrying amount of ₱420,000. ABC
Co. obtains an option to purchase similar loans and assumes a recourse obligation to repurchase similar
loans. ABC Co. also agrees to provide a floating rate of interest to the transferee company. The assets and
liabilities received as consideration for the transfer are listed below:

Assets received & liabilities assumed Fair values


Cash proceeds 250,000
Interest rate swap 120,000
Call option 60,000
Recourse obligation 120,000

6. How much is the gain (loss) on the derecognition of the financial asset?
a. 30,000
b. 7,500
c. (110,000)
d. (135,000)

7. Use the information in the immediately preceding problem above except that ABC Co. agreed to
service the loans without explicitly stating the compensation. The fair value of the service is ₱25,000.
How much is the gain (loss) on the derecognition of the financial asset?
a. 30,000
b. 7,500
c. (110,000)
d. (135,000)

8. On March 1, 20x1, ABC Co. assigned its ₱1,000,000 accounts receivable to Piggy Bank in exchange for
a 2-month, 12% loan equal to 75% of the assigned receivables. ABC Co. received the loan proceeds
after a 2% deduction for service fee based on the assigned notes. During March, ₱500,000 were
collected from the receivables. Sales returns and discounts amounted to ₱150,000. How much net cash
is received from the assignment transaction on March 1, 20x1?
a. 735,000
b. 730,000
c. 1,230,000
d. 1,235,000

Fact pattern for the next three questions:


ABC Co. factored ₱100,000 accounts receivable to XYZ Financing Corp. on a without recourse basis on
January 1, 20x1. XYZ charged a 4% service fee and retained a 10% holdback to cover expected sales
returns. In addition, XYZ charged 12% interest computed on a weighted average time to maturity of the
receivables of 73 days over 365 days.

9. How much net proceeds is received from the factoring on January 1, 20x1?
a. 100,320
b. 85,600
c. 83,600
d. 88,300

10. How much is the cost of factoring assuming all of the receivables were collected?
a. 6,400
b. 2,400
c. 16,400
d. 12,400

11. Use the ‘fact pattern’ above except that ABC Co. factored the receivables on a with recourse basis.
ABC Co. determines that the recourse obligation has a fair value of ₱3,000. How much is the loss on
sale of receivables recognized on January 1, 20x1 assuming the factoring was made on a casual basis?
a. 3,000
b. 9,400
c. 19,400
d. 6,400

12. On October 1, 20x1, ABC Co. discounted a one-year, ₱600,000, 12% note, received from a customer
on January 1, 20x1, with a bank at 14% on a without recourse basis. How much is the loss on
discounting?
a. 4,960
b. 5,250
c. 4,690
d. 5,520

13. On July 1, 20x1, ABC Co. discounted a 90-day, ₱800,000, 12% note, received from a customer on June
1, 20x1, with a bank at 16% on with recourse basis. The discounting is treated as conditional sale. The
bank uses 365 days per year in computing for discounts. On August 30, 20x1 (maturity date), the
maker of the note defaulted and the bank charged ABC Co. the maturity value of the note plus a
₱3,000 protest fee. How much is transferred to accounts receivable due to the dishonor?
a. 826,671
b. 823,671
c. 827,000
d. 862,671

14. On July 1, 20x1, Going Home Co. discounted its own note of ₱200,000 with a bank at 10% for one year.
How net proceeds did Going Home Co. receive from the transaction?
a. 180,000
b. 190,000
c. 200,000
d. 0

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