Notes and Loans Receivable c8 Valix

NOTES AND LOANS RECEIVABLE

Roth Company received from a customer a one-year, P500,000 note bearing annual interest interest of 8%. fter holding holding the note for si! months, Roth discounted discounted the note at Regional "an# at an effective interest rate of $0% $. hat amount of cash did Roth receive from the ban#& a. 5'0,000 b. 5(),8$0 c. 5$),000 d. '*5,()8 +n uly $, (00, ee Company sold goods in e!change for P(,000,000, 8 / month, noninter noninterest-bea est-bearing ring note receivable. receivable. t the time of the sale, the notes mar#et rate of interest 1as $(%. (. hat hat am amoun ountt did did ee ee rece receiv ive e 1hen 1hen it disc discou ount nted ed the the note note at $0% $0% on 2eptember $, (00& a. $,*'0,000 b. $,*)8,000 c. $,*00,000 d. $,880,000 pe! Company accepted from a customer P$,000,000 face amount, -month, 8% note date pril pril $5, (00. +n the same date date pe! discounted discounted the note at 3nion "an# at a $0% discount disco unt rate. ). 4o1 much cash should pe! receive from the ban# on pril $5, (00& a. $,0'0,000 b. **0,000 c. *88,000 d. *(,000 +n une une )0, )0, (00 (00,, Ray Ray Comp Compan any y disc discou ount nted ed at the the ban# ban# a cust custom omer ers s P,000, P,000,000 000,, -month -month,, $0% note note receiv receivabl able e dated dated pril pril )0, (00. (00. 6he ban# discounted the note at $(%. '. Rays proceeds from this discounted disco unted note amounted to a. 5,'0,000 b. 5,0,000 c. ,0'8,000 d. ,$',000 +n uly uly $, (005, (005, 7ay Corporat Corporation ion sold euipm euipment ent to 9ando 9ando Compan Company y for P$,000,000. 7ay accepted a $0% note note receivable for the entire sales price. 6his note is payable payable in t1o eual installments installments of P500,000 plus accrued accrued interest on :ecember )$, (005 and :ecember )$, (00. +n uly $, (00, 7ay discounted the note at a ban# at an interest rate o f $(% 5. 7ays proceeds from the discounted note 1ere a. '8',000 b. '*),500 c. 50),500 d. 5$,000 Rand Company accepted from a customer a P',000,000, *0-day $(% interest bearing note dated ugust )$, (00. +n 2eptember )0, (00, Rand discounted the note note at the pe! 2tate 2tate "an# at $5%. 4o1eve 4o1ever, r, the procee proceeds ds 1ere not received until +ctober $, (00. . ;n the 2eptember )0,(00 balance sheet, the amount of receivable from the ban# based on a )0-day year, includes accrued interest revenue of a. $,000 b. (0,000 c. )0,000 d. '0,000

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+n ing discount. 8. hat amount should =ann report for note payable in its :ecember )$, (00 balance sheet& a. 5,000,000 b. ',5,000 c. ',85,000 d. ','0,000 "roo#e Corporation discounted its o1n P5,000,000 one-year note at a ban#, at a discount rate of $(%, 1hen the prime rate 1as $0%. ;n reporting the note note on "roo#es balance sheet prior to the notes maturity, *. 1hat rate should "roo#e use for the accrual of interest& a. $0.0% b. $0.% c. $(.0% d. $).% ?rame Company has an 8% note receivable dated une )0, (00', in the original amount amount of P$,500,0 P$,500,000. 00. Paymen Payments ts of P500,000 P500,000 in princi principal pal plus accrue accrued d intere interest st are due annual annually ly on uly $, (005, (00 (00 and (00. ;n its une une )0, (00 balance sheet, $0. 1hat amount should ?rame report as a current asset for interest on the note receivable& a. $(0,000 b. '0,000 c. 80,000 d. 0 +n une une $, (00, @ola @ola Corpor Corporati ation on loaned :ale P500,000 P500,000 on a $(% note, payable in five annual annual installments of P$00,000 beginning anuary (, (00. ;n connection 1ith this loan, :ale 1as reuired to deposit P5,000 in a non-interest bearing bearing escro1 account. account. 6he amount amount held in escro1 escro1 is to be returned to :ale :ale after all principal and interest interest payments have been made. ;nterest on the the note is payable on the the first day of each each month beginning beginning uly uly $, (00. :ale made timely timely payme payment nts s thro throug ugh h


:ecember :ecember )$, (00 1as 8%. 6he compound compound interest interest factors to convert convert future future value into present value at 8% follo1A Present value of $ due in nine months . *'' Present value of $ due in five years . 80 $(. t 1hat amounts should these t1o notes receivable be reported in ets :ecember )$, (00 balance sheet& 4art 9a!! a. *'',000 80,000 b. *5,(00 8(,000 c. $,000,000 80,000 d. $,000,000 8(,000 +n anuary anuary $, (00 +tt Company Company sold goods to ?o! Company. Company. ?o! signed signed a noninteres noninterest-beari t-bearing ng note reuiring payment of P00,000 P00,000 annually annually for seven years. 6he first payment 1as made on anuary $, (00. 6he prevailing rate of intere interest st for this type type of note at date of issuance issuance 1as $0%. $0%. ;nform ;nformati ation on on present value factors is as follo1sA Period Present value of $ at Present value of ordinary $0% annuity of $ at $0%  . 5 '.)  . 5$ '.8 $). +tt should record sales revenue in anuary (00 of a. ),($,000 b. (,*((,000 c. (,$,000 d. (,$'(,000 Re! Company accepted a P$,000,000, (% interest bearing note from "roo#s Company on :ecember )$, (00, in e!change for a machine 1ith a list price of P800,000 P800,000 and a cash price of P50,000. P50,000. 6he note is payable payable on :ecember :ecember )$, (008. $'. ;n its (00 income statement, Re! should report the sale at a. 50,000 b. 800,000 c. $,000,000 d. $,0'0,000 +n :ecember )$, (00, Par# Company sold used euipment and received a noninterest-bearing note reuiring payment of P500,000 annually for ten years. 6he first payment is due :ecember )$, (00 and a nd the prevailing rate of interest for this type type of note at date of issuance issuance is $(%. $(%. Present Present value factors factors are as follo1sA Present value of $ at $(% for $0 periods 0.)(( Present value of ordinary annuity of $ at $(% for $0 periods 5.50 $5. ;n its :ecember )$, (00 balance sheet, Par# should report the carrying amount of the note at a. $,$0,000 b. (,$5,000 c. (,8(5,000 d. 5,000,000

On December 30, 2006, Chang Company sold a machine machine to Door Company in exchange for a noninterest bearing note requiring requiring ten annual payments of P00,000! Door made the first payment on December 30, 2006! "he mar#et interest rate for similar notes at date date of issuance $as %&! 'nformation on present present (alue factors is) Present value Present value of ordinary



a. '50,000 b. '0,000 c. (5,000 d. $,000 +n anuary (, (00, Bmme Company sold euipment 1ith a carrying carrying amount of P',800 P',800,000 ,000 in e!chang e!change e for a P,000, P,000,000 000 nonint nonintere erest st bearin bearing g note note due anuary (, (00*. 6here 1as no established e!change price for the euipment. 6he prevailing rate of interest for a note of this type on anuary (, (00, 1as $0%. 6he present value of $ at $0% for three periods is 0.5 $. ;n Bmmes (00 income statement, 1hat amount should be reported as interest income& a. *0,000 b. '50,000 c. 500,000 d. 00,000 $8. ;n Bmmes (00 income statement, 1hat amount should be reported as gain or loss on sale of euipment& a. )00,000 loss b. )00,000 gain c. $,(00,000 gain d. (,00,000 gain +n anua anuarry $, (00 (00,, 9ill ill Comp Compan any y sold sold a buil buildi ding ng and and recei eceive ved d as consideration P$,000,000 cash and a P',000,000 noninterest bearing note due on anuary $, (00*. 6here 1as no no established e!change price for the building, and the note had no ready ready mar#et. 6he prevailing prevailing rate of interest interest for a note of this type at anuary $, (00, 1as $0%. 6he present value of $ at at $0% for three periods is 0.5. $*. hat amount of interest interest revenue should be included in 9ills (00 income statement& a. )0,000 b. '00,000 c. )00,000 d. ))0,000 Pasadeas Company sold some machinery to the Rodac Company on anuary $, (005, for 1hich 1hich the cash selling selling price 1as P,58(,00 P,58(,000. 0. Rodac entered entered into into an installment installment sales sales contract contract 1ith Pasadea Pasadea at an interest interest rate of $0%. 6he contract reuired payments of P(,000,000 a year over five years 1ith the first payment due on :ecember )$, (005. (0. hat amount of interest income, if any, should be included in Pasadeas (00 income statement using the Dinterest methodE& a. $,000,000 b. )',0(0 c. 58,(00 d. 0 ppari "an# granted a loan to a borro1er on anuary $, (00. 6he interest rate on the loan is $0% payable payable annually annually starting starting :ecembe :ecemberr )$, (00. 6he loan matures in five years on :ecember )$, (0$0. Principal amount ',000,000 :irect origination cost $,500 +rigination fee received from borro1er )50,000 6he effective rate on the loan after considering the direct origination cost and



d. ),$$,500 ((. hat is the interest income for (00& a. '00,000 b. 558,000 c. 5(*,)80 d. ''5,)80


:ecember )$, (008 :ecember )$, (00* :ecember )$, (0$0 6he present value of $ at $$% is as follo1sA ?or one period ?or t1o period ?or three period ?or four period

$,000,000 (,000,000 ',000,000 0.*0 0.8$ 0.) 0.

(. 4o1 much is the loan impairment loss on :ecember )$, (00& a. (,*5,000 b. (,('0,000 c. 5,)0,000 d. (,$'0,000 (8. hat is the interest income to be reported by "us1ang "each "an# in (00& a. 58*,00 b. 5)',00 c. 8(5,000 d. 5**,'5

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Notes and Loans Receivable c8 Valix

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