INTERMEDIATE ACCOUNTING

1. SIPAG Company provided, from its financial records, all information related to its receivables as of December 31
as follows:
Accounts receivable, January 1 ₱1,920,000
Collections of accounts receivable 6,240,000
Bad debts 200,000
Inventory, January 1 2,880,000
Inventory, December 31 2,640,000
Accounts payable, January 1 1,000,000
Accounts payable, December 31 1,500,000
Cash sales 1,200,000
Purchases 4,800,000
Gross profit on sales 2,160,000

What is the balance of SIPAG Co.’s receivables on December 31? ₱1,680,000

2. At the close of its first year of operations, December 31, 2018, TYAGA Incorporated had accounts receivable of
₱540,000 after deducting the related allowance for doubtful accounts. During 2018, the company had charges to
bad debt expense of ₱90,000 and wrote off, as uncollectible accounts receivable, ₱40,000. What should TYAGA
report on its statement of financial position at December 31, 2018 as accounts receivable before the allowance
for doubtful accounts? ₱590,000

3. TALINO Corporation had a specific receivable from a customer in the amount of ₱600,000 as of December 31,
2014. During 2018, the customer informed TALINO that servicing of its payable will be made once there is
significant improvement in their financial capabilities. Since there are no available historical data relating to similar
borrowers, TALINO uses its experienced judgment to estimate the amount of impairment loss. Reasonable
estimate revealed that the fair value of the receivable as of December 31, 2018 represents 40% of the outstanding
receivable. What amount of impairment loss on its receivable should TALINO Corp. report for 2018? ₱360,000

4. INGAT Company showed the following information related to the accounts receivable in order to estimate bad
debts through the use of aging. The credit period of the company is 30 days on the average.
Age of Receivables Amount
Under 30 days ₱4,000,000
31 to 60 days 1,500,000
61 to 90 days 1,000,000
91 to 120 days 500,000
121 to 150 days 200,000
151 to 180 days 100,000
The company, based on experience, has the following percentage of collectability:
Accounts which are overdue for less than 30 days 97%
Accounts which are overdue 31 to 60 days 90%
Accounts which are overdue 61 to 90 days 75%
Accounts which are overdue 91 to 120 days 55%
Accounts which are overdue 121 to 150 days 30%
Accounts which are overdue for over 150 days 25%
What is the carrying value of INGAT’s accounts receivable for balance sheet reporting purposes? ₱6,870,000

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 The following information relates to the succeeding three questions.
On January 1, 2015, PAASA Company sold equipment with a carrying amount of ₱480,000 in exchange for a
₱600,000 non-interest bearing note due January 1, 2018. There was no established exchange price for the
equipment. The prevailing rate of interest for a note of this type at January 1, 2015 was 10%. (Round off factors
to four decimal places)
5. How much should PAASA report as interest income in its 2015 statement of profits and losses? ₱45,078
6. How much should PAASA report as gain or loss on sale of equipment in its 2015 statement of profits and losses?
₱29,220 loss
7. What is the carrying value of the note receivable to be reported in the statement of financial position as of
December 31, 2015? ₱495,858

8. ASSUMERA Inc. granted a 10%, 2-year ₱5,000,000 loan to HOPIA Co. on January 1, 2018. The interest is payable
every December 31 for each year during the term of the contract. ASSUMERA incurred an origination cost of
328,326 but charged HOPIA ₱150,000 as origination fee. The effective interest, after considering the origination
cost and origination fee, is 8%. Due to financial difficulty, HOPIA was unable to pay the interest on December 31,
2018 and ASSUMERA then considered the loan to be impaired. Reliable estimate show that the projected cash
flows from the loan are as follows:
₱2,000,000 on December 31, 2019, and
₱3,000,000 on December 31, 2020.
What amount of impairment loss on the loan should ASSUMERA recognize on December 31, 2018? (Round off
factors to six decimal places) ₱1,168,723

9. SUKOKANA Corp. sold its inventory for ₱300,000 to HINDIPA Co. on January 1, 2015 and received a one-year note
bearing an interest rate of 12% for the full amount. On December 31, 2015, SUKOKANA determined based on
HINDIPA’s recent financial crisis and the amount due on January 1, 2016 will not be collected and that only
₱210,000 of the principal will be collected with some delay until the end of 2017. What is the carrying amount of
the notes receivable on SUKOKANA’s 2015 statement of financial position? (Round off factors to four decimal
places) ₱167,412

10. On January 2, 2015, PARANGNAKITANAKITA Corporation assigned ₱1,000,000 of accounts receivable to

SAPANGARAP Co. as a security for a one-year loan of ₱600,000. SAPANGARAP charged a 2% commission on the
amount of the loan; the interest rate on the note was 10%. During January, PARANGNAKITANAKITA collected
₱245,000 on assigned accounts after deducting ₱5,000 of discounts. PARANGNAKITANAKITA accepted returns
worth ₱10,000 and wrote off assigned accounts totaling ₱9,000. What amount of loss from the transfer should
PARANGNAKITANAKITA Corp. recognize? _______________________ none

11. On November 1, 2014, YAMANKABA Inc. assigned on a non-notification basis accounts receivable of ₱4,000,000
to a bank in consideration for a 24% interest bearing loan. The loan value was 80% of the receivables assigned and
a 5% service fee on the accounts assigned was charged by the finance company. YAMANKABA collected assigned
accounts of ₱1,500,000 and ₱1,000,000 on November and December, respectively, and remitted the collections
to the finance company on a monthly basis in partial payment for the loan. The finance company applied first the
collection to the interest and the balance to the principal. In its December 31, 2014 balance sheet, YAMANKABA
Inc. should report loan payable at _______________________. ₱799,280

12. On February 1, 2014, HIRAPKASIKAPAGWALAKA Company factored receivables with a face amount of ₱600,000
to WEH Corporation. HIRAPKASIKAPAGWALAKA advances ₱490,000 to WEH and retains 5% of the receivables.
Prior to the sale of the receivables it was determined that 2% of the receivables were deemed not collectible
based on available information at that time, thereby, the company made the necessary accounting of the said
development in their 2014 financial records. HIRAPKASIKAPAGWALAKA incurred and paid ₱6,000 transaction cost
related to the factoring. What amount of loss from the transfer should HIRAPKASIKAPAGWALAKA recognize
assuming the factoring agreement is considered as a sale? _______________________ ₱74,000
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13. Refer to the immediately preceding item. What amount of loss from transfer should HIRAPKASIKAPAGWALAKA
recognize assuming the factoring agreement is considered as borrowings? _______________________ none

14. On September 30, 2014, KAKAYANIN Company discounted at the bank a customer’s ₱600,000, 6-month, 10% note
receivable dated May 31, 2014. The bank discounted the note at 12%. What amount of gain or loss should
KAKAYANIN Co. recognize from the transfer assuming the discounting is treated as a sale?
_______________________ ₱2,600

15. Refer to the immediately preceding information. What amount of gain or loss should KAKAYANIN Co. recognize
from the transfer assuming the discounting is treated as a borrowing? _______________________ none

“You can't study the darkness

by flooding it with light.”
― Edward Abbey

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