Theories: TRUE or FALSE

1. For long-term noninterest-bearing notes receivable, the amortized cost

is the present value plus amortization of the discount, or the face value
minus the amortized unearned interest income.
2. The balance on the Notes Receivable account is net of the unamortized
interest income.
3. Receivable financing is the financial flexibility or capability of an entity
to raise money out of its receivables.
4. Trade receivables are classified as current assets if they are reasonably
expected to be collected within one year or within the normal
operating cycle of the business, whichever is longer.
5. Full disclosure principle primarily supports the use of allowance for
doubtful accounts.
6. Inventories are classified as current assets because they are expected
to be sold or consumed within the normal operating cycle of the entity.
7. In a merchandising business, one inventory account is maintained
while in a manufacturing business, two inventory accounts are
maintained.
8. Trade discounts are recorded as a debit to Accounts Payable and a
credit to Purchase Discount.
9. Prime cost includes Direct Materials and Direct Labor costs.
10.
Cost principle states that an asset should not be carried above its
recoverable amount.
11.
Inventories are measured at net realizable value.
12.
Inventories are measured at fair value less cost of disposal.
13.
The net realizable value of an inventory is the estimated selling
price less the estimated cost of completion and the estimated cost of
disposal.
14.
The processing of grapes into wine is covered by PAS 2.
15.
If the loan is discounted, in the banking parlance this means that
the interest for the term of the loan is deducted in advance.
16.
The amount of the loss is measured as the difference between
the carrying amount of the loan and the present value of estimated
future cash flows discounted at current prevailing market interest rate.
17.
If the recovery is subsequent to the year of write off and the
direct write off method is used, the recovery may simply be credited to
other income.
18.
Loss on inventory write down is presented in the income
statement as other expense.
19.
Loss on inventory write down is included in the computation of
cost of goods sold.
20.
The amount of inventory recognized as an expense of the period
is the amount of any reversal of any write down of inventory arising
from an increase in net realizable value.

PROBLEM 1
The balances of selected accounts taken from the December 31, 2014 of
BABAWIAKOSAMIDTERMS Company are shown below:
Accounts receivable
P
674,000
Allowance for doubtful accounts
24,000
The following transactions (in summary) affecting Accounts receivable
occurred during the year ended December 31, 2015:
Sales (all on account, terms, 2/10, 1/15, n/60)
P3,000,000
Cash received from customers
3,200,000
The cash received includes the following:
Customers paying w/in the 10-day discount period
1,764,000
Customers paying w/in the 15-day discount period
990,000
Recovery of accounts written off
6,000
Customers paying beyond the discount period
?
Accounts receivable written off as worthless
22,000
Credit Memo for sales returns
12,000
It is the companys policy to provide for uncollectible accounts equal to 1% of
Sales. How much is the Net Realizable Value of the Accounts receivable as of
December 31, 2015?
PROBLEM 2
PRACMUNABAGOAUD Company has an 8% note receivable dated June 1,
2014, in the original amount of P600,000. Payments of P200,000 in principal
plus accrued interest are due annually on June 1, 2015, 2016, and 2017.
For the year ended December 31, 2015, what amount should
PRACMUNABAGOAUD report as Interest Income on the Notes receivable?

PROBLEM 3
A tract of land was sold by ZOMBIENAMGABSAC3 Inc., on July 1, 2015, for
P2,000,000 under an installment sale contract. ZOMBIENAMGABSAC3 signed
a 4-year 11% note for P1,400,000 on July 1, 2015, in addition to the down
payment of P600,000. The equal annual payments of principal and interest
on the note will be P451,250 payable on July 1, 2016, 2017, 2018, and 2019.
The land had an established cash price of P2,000,000 and its cost to
ZOMBIENAMGABSAC3 was P1,500,000. The collection of the installments of
this note is reasonably assured.
How much is the non-current portion of the notes receivable at December 31,
2015?

PROBLEM 4
Wagkangsusuko Companys inventory at December 31, 2016, was
P1,500,000 based on a physical count priced at cost, and before any
necessary adjustment for the following:
Merchandise costing P90,000, shipped FOB shipping point from a vendor on
December 30, 2016, was received and recorded on January 5, 2017.
Goods in the shipping area were excluded from inventory although
shipment was not made until January 4, 2017.
The goods, billed to the customer FOB shipping point on December 30, 2016,
had a cost of P120,000.
What amount should Wagkangsusuko report as inventory in its December 31,
2016 balance sheet?
PROBLEM 5
HUHU Companys usual sales terms are net sixty days, FOB shipping point.
Sales, net of returns and allowances, totaled P2,300,000 for the year ended
December 31, 2013, before year-end adjustments. Additional data are as
follows:
On December 27, 2013, HUHU authorized a customer to return, for full
credit, goods shipped and billed at P50,000 on December 15, 2013. The
returned goods were received by HUHU on January 4, 2014, and a P50,000
credit memo was issued and recorded on the same date.
Goods with an invoice amount of P80,000 were billed and recorded on
January 3, 2014. The goods were shipped on December 30, 2013.
Goods with an invoice amount of P100,000 were billed and recorded on
December 30, 2013.
The goods were shipped on January 3, 2014.
HUHUs adjusted net sales for 2013 should be?

PROBLEM 6
On July 31, 2015, DOLCEAMORE Company discounted at the bank a
customers P600,000, 6-month, 10% note receivable dated May 31, 2015.
The bank discounted the note at 12%. How much is the proceeds
DOLCEAMORE received from this discounted note?
PROBLEM 7
INAANTOKNA Company received from a customer a one-year, P375,000 note
bearing annual interest of 8%. After holding the note for six months,
INAANTOKNA discounted he note at Super Bank at an effective interest rate
of 10%.
a. How much did INAANTOKNA receive from the bank?
b. If the discounting is treated as a sale, what amount of loss from
discounting should INAANTOKNA recognize?
c. If the discounting is treated as a borrowing, what amount of loss from
discounting should INAANTOKNA recognize?