Loans and Receivables Sample Problems Part 2

1. Fatima Company obtained a one-year loan of P5,000,000 from a bank on April 1, 2005. The loan
was discounted at 12%. The company signed a note and pledged its accounts receivable of
P5,000,000 as collateral for the loan. In relation to the loan, Fatima should report note payable
on December 31, 2005 at
a. P4,850,000
c. P5,450,000
b b. P4,400,000
d. P4,550,000
2. On December 1, 2005 Loida Company assigned on a nonnotification basis accounts receivable
of P5,000,000 to a bank in consideration for a loan of 90% of the receivables less a 5% service
fee on the accounts assigned. Loida signed a note for the bank loan. On December 31, 2005,
Loida collected assigned accounts of P3,000,000 less discount of P200,000. Loida remitted the
collections to the bank in partial payment for the loan. The bank applied first the collection to
the interest and the balance to the principal. The agreed interest is 1% per month on the loan
balance. In its December 31, 2005 balance sheet, Loida should report note payable as a current
liability at
a. P1,745,000
c. P1,545,000
b. P1,700,000
d. P2,250,000
3. On September 30, 2005, Ren Company discounted at the bank a customers P5,000,000 6month 10% note receivable dated June 30, 2005. The bank discounted the note at 12%. The
proceeds from this discounted note amounted to
a. P5,092,500
c. P4,842,000
b. P5,250,000
d. P5,170,000
4. On April 1, an entity assigned P700,000 of accounts receivable to a bank under a nonnotification basis. The bank advances 80% less a service charge of P5,000. The entity signed a
promissory note that provides for interest at 1% per month on the unpaid amount. On April 5,
customer whose account was assigned returned goods purchased amounting to P20,000. On
April 10, a total of P300,000 of the accounts assigned were collected net of 2% discount. On
April 30, the entity remitted the total collections plus one month interest. How much is the
equity in assigned accounts? 114,000
5. An entity factored accounts receivable of P500,000 with credit terms of 2/10, n/30 immediately
after shipment of goods to the customer. The factor charges a 5% commission based on the
gross amount of the receivables factored. In addition, the factor withholds 20% of the amount of
the receivables factored to cover sales returns and allowances. How much is the cash received
from factoring and the loss from factoring? 365,000 0
6. A P1,000,000 180-day 12% note dated July 1 was received from a customer and discounted
without recourse on August 30 at 15% discount rate. How much is the gain or loss on note
discounting? 13,000 loss
7. International bank loaned P5,000,000 to Bankard Company on January 1, 2007. The terms of the
loan require principal payment of P1,000,000 each year for 5 years plus interest at 10%. The
first principal payment is due on December 31, 2007. Bankard was able to make the required
payments on 2007 and 2008 but began experiencing financial difficulty during 2009 causing it
to default in paying the required amount on December 31, 2009. On that date, International
Bank ascertained the collection the remaining principal as follows:
December 31, 2010
500,000
December 31, 2011
1,000,000
December 31, 2012
1,500,000
The collection of the interest is unlikely. How much is the impairment loss on December 31,
2009 and the interest income on December 31, 2010?
892,100 214,869

8. Mummy Pekyew loaned P6,000,000 to Team Breadley evidenced by a 6 year 12% loan dated
January 1, 2010. The loan requires annual principal payment of 1,000,000 plus interest starting
Dacember 31, 2010. Team Breadley was able to make payments for 2010 and 2011 but began

having financial problems in January 2012 due to a fire loss in its warehouse. Mummy Pekyew
estimated that it can collect the remaining principal as follows:
2012201320142015-

800,000
1,200,000
1,500,000
500,000

Mummy Pekyew waived the interest on the loan. How much is the impairment loss on this loan?
How much is the discount on Loans Receivable as of December 31, 2013?