Chapter 6-receivables 2 271j6y

Chapter 6 Receivables (Part 2) Chapter 6: Multiple choice – Computational (SET B) – (For classroom instruction purposes) Initial measurement 1. An entity sells goods either on cash basis or on 6-month installment basis. On January 1, 20x1, goods with cash price of ₱50,000 were sold at an installment price of ₱75,000. Which of the following statements is correct? a. Net receivable of ₱75,000 is recognized on the date of sale. b. Net receivable of ₱50,000 is recognized upon full payment of the total price. c. The ₱20,000 difference between the cash price and installment price is recognized as interest income on the date of sale. d. Net receivable of ₱50,000 is recognized on the date of sale. Initial measurement 2. An entity sells goods for ₱150,000 to a customer who was granted a special credit period of 1 year. The entity normally sells the goods for ₱120,000 with a credit period of one month or with a ₱10,000 discount for outright payment in cash. How much is the initial measurement of the receivable? a. 150,000 b. 120,000 c. 130,000 d. 110,000 Initial measurement 3. ABC Co. received the following note receivables on January 1, 20x1: 9-month, 10% note from Alpha Company. 15,000 6-month, noninterest bearing note from Beta, Inc. (the effect of discounting is deemed immaterial) 20,000 14%, 3-year note from Charlie Corp. 30,000 Market rate of interest on January 1, 20x1 10% At what total net amount will the notes be initially recognized? a. 65,000 b. 53,673 c. 62,357 d. 50,000 Simple interest 4. On August 1, 20x1, ABC Co. received a ₱1,200,000, 10%, 3-year note receivable in exchange for a vacant lot carried in the books at ₱850,000. Principal, in three equal installments, plus interest are due annually starting August 1, 20x2. Current market rates as of April 1, 20x1, December 31, 20x1, and December 31, 20x2 are 10%, 12% and 13%, respectively. How much interest receivable is recognized on December 31, 20x2? a. 33,333 b. 40,000 c. 50,000 d. 60,000

1|Page

Compounded interest 5. On January 1, 20x1, ABC Co. extended a ₱1,200,000 loan to one of its officers as part of ABC Co.’s car and housing assistance program. The note received is due on January 1, 20x4 and bears 10% interest compounded annually. How much interest receivable is recognized on December 31, 20x2 statement of financial position? a. 132,000 b. 120,000 c. 168,000 d. 252,000 Noninterest-bearing note – lump sum Use the following information for the next two questions: On January 1, 20x1, ABC Co. sold a transportation equipment with a historical cost of ₱1,000,000 and accumulated depreciation of ₱300,000 in exchange for cash of ₱100,000 and a noninterest-bearing note receivable of ₱800,000 due on January 1, 20x4. The prevailing rate of interest for this type of note is 12%. 6. How much is the interest income in 20x1? a. 68,331 b. 76,532 c. 85,714

d. 96,000

7. How much is the carrying amount of the receivable on December 31, 20x2? a. 800,000 b. 569,424 c. 637,755 d. 714,286 Noninterest-bearing note – installments Use the following information for the next three questions: On January 1, 20x1, ABC Co. sold transportation equipment with a historical cost of ₱20,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱500,000 and a noninterest-bearing note receivable of ₱8,000,000 due in 4 equal annual installments starting on December 31, 20x1 and every December 31 thereafter. The prevailing rate of interest for this type of note is 12%. 8. How much is the interest income in 20x1? a. 728,946 b. 678,334 c. 728,964

d. 704,236

9. How much is the current portion of the receivable on December 31, 20x1? a. 1,271,036 b. 1,423,560 c. 3,380,102 d. 1,594,388 10. How much is the carrying amount of the receivable on December 31, 20x2? a. 4,803,663 b. 3,380,102 c. 6,074,699 d. 6,000,000 Noninterest-bearing note – installment in advance Use the following information for the next three questions: On January 1, 20x1, ABC Co. sold transportation equipment with a historical cost of ₱12,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱100,000 and a noninterest-bearing note receivable of ₱4,000,000 due in 4 equal annual installments starting on January 1, 20x1 and every January 1 thereafter. The prevailing rate of interest for this type of note is 12%. 11. How much is the interest income in 20x1? a. 408,230 b. 278,334 c. 328,964

d. 288,220

12. How much is the carrying amount of the receivable on December 31, 20x1? a. 1,690,510 b. 892,857 c. 2,690,051 d. 1,594,388 13. How much is the carrying amount of the receivable on January 1, 20x3? a. 892,857 b. 3,380,102 c. 6,074,699 d. 6,000,000

2|Page

Noninterest-bearing note – semiannual cash flows Use the following information for the next two questions: On January 1, 20x1, ABC Co. sold machinery with historical cost of ₱3,000,000 and accumulated depreciation of ₱900,000 in exchange for a 3-year, ₱2,100,000 noninterestbearing note receivable due in equal semi-annual payments every July 1 and December 31 starting on July 1, 20x1. The prevailing rate of interest for this type of note is 10%. 14. How much is the interest income in 20x1? a. 88,825 b. 177,649 c. 128,964

d. 164,591

15. How much is the carrying amount of the receivable on December 31, 20x1? a. 1,241,083 b. 982,378 c. 1,690,051 d. 1,594,388 Noninterest-bearing note – non-uniform cash flows 16. On January 1, 20x1, ABC Co. sold machinery costing ₱3,000,000 with accumulated depreciation of ₱1,100,000 in exchange for a 3-year, ₱900,000 noninterest-bearing note receivable due as follows: Date Amount of installment December 31, 20x1 400,000 December 31, 20x2 300,000 December 31, 20x3 200,000 Total 900,000 The prevailing rate of interest for this type of note is 10%. How much is the carrying amount of the receivable on December 31, 20x1? a. 467,354 b. 438,016 c. 376,345 d. 428,346 Receivable with cash price equivalent Use the following information for the next two questions: On January 1, 20x1, ABC Co. sold inventory costing ₱1,800,000 with a list price of ₱2,200,000 and a cash price of ₱2,000,000 in exchange for a ₱2,400,000 noninterestbearing note due on December 31, 20x3. 17. How much is the initial measurement of the receivable? a. 1,800,000 b. 2,200,000 c. 2,000,000 d. 2,400,000 18. How much is the carrying amount of the receivable on December 31, 20x1? a. 2,125,390 b. 2,135,341 c. 2,098,343 d. 2,000,000 Note with below-market interest (simple interest) - Principal due at maturity, interests due periodically 19. On January 1, 20x1, ABC Co. sold machinery with historical cost of ₱5,000,000 and accumulated depreciation of ₱1,900,000 in exchange for a 3-year, 3%, ₱3,000,000 note receivable. Principal is due on January 1, 20x4 but interest is due annually every December 31. The prevailing interest rate for this type of note is 12%. How much is the carrying amount of the receivable on December 31, 20x1? a. 2,159,324 b. 2,249,324 c. 2,543,685 d. 3,000,000 Note with below-market interest (simple interest) - Principal due at maturity, interests due in semi-annual installments 20. On July 1, 20x1, ABC Co. sold machinery costing ₱12,000,000 with accumulated depreciation of ₱9,000,000 in exchange for a 3-year, 3%, ₱4,000,000 note receivable. Principal is due on July 1, 20x4 but interests are due semiannually every July 1 and January 1. The prevailing interest rate for this type of note is 12%. How much is the interest income in 20x1? a. 186,893 b. 381,399 c. 94,147 d. 120,000 3|Page

Note with below market interest (simple interest) - Principal and interests collectible in installments 21. On January 1, 20x1, ABC Co. sold machinery costing ₱2,000,000 with accumulated depreciation of ₱950,000 in exchange for a 3-year, 3%, ₱900,000 note receivable. Principal is due in three equal annual installments. Interests on the outstanding principal balance are also due annually and are to be collected together with the periodic collections on the principal. The prevailing interest rate for this type of note is 12%. How much is the carrying amount of the receivable on December 31, 20x1? a. 530,261 b. 1,000,562 c. 673,531 d. 789,361 Note with below market interest (compound interest) - Principal and interests due at maturity 22. On January 1, 20x1, ABC Co. sold machinery costing ₱2,000,000 with accumulated depreciation of ₱950,000 in exchange for a 3-year, ₱1,200,000 note receivable. Principal and interest at 3% are due on January 1, 20x4. The prevailing interest rate for this type of note is 12%. How much is the carrying amount of the receivable on initial recognition date? a. 1,311,272 b. 2,000,000 c. 933,337 d. 854,136 Total interest income over the life of a note 23. ABC Co. received a ₱1,000,000, 8%, 5-year note that requires five equal annual yearend payments. The effective interest rate on the note is 9%. How much is total interest revenue to be earned on the note? a. 250,438 b. 278,074 c. 25,882 d. 225,882 Non-interest bearing note with deferred uniform payments 24. On January 1, 20x1, ABC Co. sold a used equipment in exchange for a ₱1,200,000 noninterest-bearing note receivable due in three equal annual installments starting January 1, 20x4. The current market rate of interest on January 1, 20x1 is 12%. How much is the carrying amount of the receivable on initial recognition date? a. 890,365 b. 728,860 c. 765,890 d. 821,060 Non-interest bearing note with deferred non-uniform payments 25. On January 1, 20x1, ABC Co. sold a used equipment in exchange for a ₱4,500,000 noninterest bearing note due in three annual installments as follows: Jan. 1, 20x4 2,000,000 Jan. 1, 20x5 1,500,000 Jan. 1, 20x6 1,000,000 Total 4,500,000 The current market rate of interest on January 1, 20x1 is 12%. How much is the carrying amount of the receivable on initial recognition date? a. 1,980,685 b. 2,728,860 c. 2,944,264 d. 2,818,706 Pre-acquisition accrued interest 26. On March 1, 20x1, ABC Co. received a ₱1,000,000, 12%, one-year note dated January 1, 20x1 from XYZ, Inc. in exchange for a ₱1,000,000 past due . How much interest income is recognized in 20x1? a. 120,000 b. 100,000 c. 90,000 d. 0

4|Page