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Notes Receivables: 1. Present Value Is

1. Present value is the value now of a future amount and is always smaller than the future value. 2. For an interest rate of 12% over six periods, the factor that would show the largest present value is the present value of an ordinary annuity of 1. 3. A higher interest rate results in a decreased amount of present value, while a shorter period results in an increased amount of present value.

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669 views4 pages

Notes Receivables: 1. Present Value Is

1. Present value is the value now of a future amount and is always smaller than the future value. 2. For an interest rate of 12% over six periods, the factor that would show the largest present value is the present value of an ordinary annuity of 1. 3. A higher interest rate results in a decreased amount of present value, while a shorter period results in an increased amount of present value.

Uploaded by

Zyrene Kei Reyes
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Notes Receivables

1. Present value is
a. the value now of a future amount.
b. the amount that must be invested now to produce a known future value.
c. always smaller than the future value.
d. all of these.
 
2. Which of the following factors would show the largest value for an interest rate of
12% for six periods?
a. Present value of 1
 
b. Present value of an ordinary annuity of 1
c. Present value of an annuity due of 1
d. Answer cannot be determined

 
3. A higher interest rate results to
a. increased amount of present value.
b. decreased amount of present value.
c. same amount of present value.
d. Answer cannot be determined due to insufficient data

 
4. A shorter period results to
a. increased amount of present value.
b. decreased amount of present value.
c. same amount of present value.
d. shorter accountant.

 
5. The present value of 1 for a period of zero equals
a. 1.
b. 0.
c. Error!
d. Answer depends on the interest rate

 
6. An entity sells goods either on cash basis or on 6-month installment basis. On
January 1, 20x1, goods with cash price of ₱50,000 were sold at an installment price of
₱75,000. Which of the following statements is correct?
a. Net receivable of ₱75,000 is recognized on the date of sale.
b. Net receivable of ₱50,000 is recognized upon full payment of the total price.
c. The ₱20,000 difference between the cash price and installment price is recognized as interest
income on the date of sale.
d. Net receivable of ₱50,000 is recognized on the date of sale.
 
7. An entity sells goods for ₱150,000 to a customer who was granted a special credit
period of 1 year. The entity normally sells the goods for ₱120,000 with a credit period
of one month or with a ₱10,000 discount for outright payment in cash. How much is
the initial measurement of the receivable if the entity does not use the practical
expedient allowed under PFRS 15?
a. 150,000
b. 130,000
c. 120,000
d. 110,000
 
On January 1, 20x1, ABC Co. sold a transportation equipment with a historical cost of
₱1,000,000 and accumulated depreciation of ₱300,000 in exchange for cash of ₱100,000
and a noninterest-bearing note receivable of ₱800,000 due on January 1, 20x4. The
prevailing rate of interest for this type of note is 12%.

 
8. How much is the interest income in 20x1?
a. 68,331
b. 76,532
c. 85,714
d. 96,000

 
9. How much is the carrying amount of the receivable on December 31, 20x2?
a. 800,000
b. 569,424
c. 637,755
d. 714,286
 
On January 1, 20x1, Mojo Co. sold transportation equipment with a historical cost of
₱20,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of
₱500,000 and a noninterest-bearing note receivable of ₱8,000,000 due in 4 equal annual
installments starting on December 31, 20x1 and every December 31 thereafter. The
prevailing rate of interest for this type of note is 12%.

 
10. How much is the interest income in 20x1?
a. 728,946
b. 678,334
c. 728,964 
d. 704,236

 
11. How much is the current portion of the receivable on December 31, 20x1?
a. 1,271,036
b. 1,423,560
c. 3,380,102
d. 1,594,388

 
12. How much is the carrying amount of the receivable on December 31, 20x2?
a. 4,803,663
b. 3,380,103
c. 6,074,699
d. 6,000,000

On January 1, 20x1, ABC Co. sold transportation equipment with a historical cost of
₱12,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of
₱100,000 and a noninterest-bearing note receivable of ₱4,000,000 due in 4 equal annual
installments starting on January 1, 20x1 and every January 1 thereafter. The prevailing rate
of interest for this type of note is 12%.

 
13. How much is the interest income in 20x1?
a. 408,230
b. 278,334
c. 328,964
d. 288,220

 
14. How much is the carrying amount of the receivable on December 31, 20x1?
a. 1,690,510
b. 892,857
c. 2,690,051
d. 1,594,388

 
15. How much is the carrying amount of the receivable on January 1, 20x3?
a. 892,857
b. 3,380,102
c. 6,074,699
d. 6,000,000

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