Reference no: EM132789007

Questions -

Q1. Freelance Factors provides financing to other companies by purchasing their accounts receivable on a non-recourse basis. Freelance charges commission to its clients of 15% of receivables factored. In addition, Freelance withholds 10% of receivables factored as protection against sales returns and other adjustments. Freelance credits the 10% withheld to Client Retainer and makes payments to clients at the end of each month so that the balance in the Retainer account is equal to 10% of the unpaid receivables at the end of the month. Freelance recognizes its 15% commissions as revenue at the time the receivables are factored. Also, experience has led Freelance to establish an Allowance for Bad Debts of 4% of all receivables purchased. On January 2, 2021, Freelance purchased receivables from Committed Company totaling P1,500,000. Committed had previously established an Allowance for Bad Debts for these receivables of P35,000. By January 31, 2021, Freelance had collected P1,200,000 on these receivables. What amount of loss on factoring should Committed Company recognize on the sale of its receivable?

a. 190,000

b. 150,000

c. Zero

d. 225,000

Q2. Bruno received from a customer a one-year, P375,000 note bearing note bearing annual interest of 8%. After holding the note for six months, Bruno discounted the note at Super Bank at an effective interest rate of 10%. If the discounting is treated as a conditional sale, what amount of loss on discounting should Bruno recognize?

a. 20,250

b. 5,250

c. 9,750

d. Zero

Q3. Banco de Oro has loaned P9,000 to Northern Star Company, using a 90-day non-interest-bearing note. The bank discounted the note at 7%. The credit to discount on Notes Receivable in the general journal will be in the amount of

a. P9,000.00.

b. P8,842.50.

c. P157.50.

d. P9,157.50.

Q4. On July 1, 2019, Maricris Company received a P20,000 promissory note from Jordyn Company. The annual interest rate is 5%. Principal and interest are paid in cash at the maturity date of June 30, 2020. If Maricris's fiscal year ends September 30, 2019, an adjusting entry is needed to:

a. Increase notes receivable by P250

b. Increase notes receivable by P1,000

c. Increase interest revenue by P1,000

d. Increase interest receivable by P250

Q5. On October 31, 2021, Bundle Company engaged in the following transactions: (1) Obtained a P500,000, six-month loan from City Bank, discounted at 12%. The company pledged P500,000 of accounts receivable as security for the loan. What is the total cash received from the financing of receivables?

a. 360,000

b. 500,000

c. 440,000

d. 470,000

Q6. On September 1, 2020, Thunder Company received an P80,000, 12%, 120-day note from a credit customer wishing to extend its repayment period. On October 2, 2020, thirty days after the note was received, Thunder discounted the note at the bank at 14%. Using 360 days in a year, how much cash did Thunder Company receive from the bank?

a. 79,317

b. 80,749

c. 80,800

d. 80,288

Q7. Bank of the Philippine Islands has loaned P12,000 to Aina Company using a 60-day non-interest-bearing note. The bank discounted the note at 12%. The proceeds of the loan will be *

a. P12,000.

b. P12,240.

c. P240.

d. P11,760.

Q8. Hollie Star Company received a 90-day, 6% note for P80,000, dated March 12 from a customer on account. Journalize the entry at maturity date to record the receipt of the payment of the note.

a. JUNE 12/ DR CASH 81,200 / CR NOTES RECEIVABLE 81,200

b. JUNE 10/ DR CASH 81,200 / CR NOTES RECEIVABLE 80,000; INTEREST REVENUE 1, 200

c. JUNE 10 / DR CASH 81,200 / CR NOTES RECEIVABLE 81,200

d. JUNE 12 /DR CASH 81,200/CR NOTES RECEIVABLE 80,000; INTEREST REVENUE 1,200

Q9. Justine Company received the proceeds of P48,750 from discounting a P50,000, 90-day note at Metrobank. The discount rate used by the bank in computing the proceeds was

a. 10.00%

b. 9.75%

c. 10.26%

d. 6.25%

Q10. On December 1, 2021, Hero Company assigned P400,000 of accounts receivable to Halo Company as a security for a loan of P335,000. Hero Company charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During December, Hero collected P110,000 on assigned accounts after deducting P380 of discounts. Hero accepted returns worth P1,350 and wrote off accounts totaling P2,980. What is the carrying amount of the accounts receivable assigned as of December 31, 2021?

a. 285,290

b. Zero

c. 289,620

d. 290,000