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1. How to generate cash from the receivables without

collecting them?

a. Sell the receivables.

b. Use the receivables as collateral.

c. Either a or b.

d. Neither a nor b.

2. Why would a company sell receivables to another

company?

a. To improve the quality of its credit granting process.

b. To limit its legal liability.

c. To comply with customer agreements.

d. To accelerate access to amounts collected.

3. If financial assets are exchanged for cash or other

consideration, but the transfer does not meet the criteria for

a sale, the transferor and the transferee should account for

the transaction as a

Secured borrowing Pledge of collateral

a. Yes Yes

b. Yes No

c. No Yes

d. No No

4. All but one of the following are required before a transfer of

receivables can be recorded as a sale.

a. The transferred receivables are beyond the reach of the

transferor and its creditors.

b. The transferor has not kept effective control over the

transferred receivables through a repurchase

agreement.

c. The transferor maintains continuing involvement.

d. The transferee can pledge or sell the transferred

receivables.

Pledge

5. Accounts receivable hypothecated against borrowing

should be

a. Disclosed in the notes

b. Excluded from the total receivable, with disclosure

c. Excluded from the total receivables, with no disclosure

d. Excluded from the total receivables and a gain or loss

is recognized

6. Which of the following is not a valid comparison between

pledging and assignment of accounts receivable?

a. Under pledge, all accounts receivables are set as

collateral security for borrowings; under assignment

only specific receivables are set as collateral security.

b. In pledging, the lender has limited rights to inspect the

borrower's records to achieve assurance that the

receivables do exist; in assignment the lender will

make an investigation of the specific receivables that

are being proposed for assignment and will approve

those that are deemed worthy to be held as collateral

security.

c. No journal entry is made for the pledged receivables;

an entry is made for the assigned receivables.

d. Pledged accounts receivable remain the assets of the

borrower and continue to be presented in its financial

statements, with appropriate disclosure of the pledge

transaction; assigned receivables are assets of the

lender/assignee but the assignment is disclosed in the

financial statements of the borrower/assignor.

Assignment

7. Cadiz, Inc., assigned P10,000 to a finance company,

receiving an advance of 90% less a service charge of P400.

Later P2,000 of these receivables were collected and

remitted to the finance company with an additional P200 of

interest. Given this information, which entry would not be

made?

a. Cash 8,600

Assignment Service Charge expense 400

Accounts Receivable 9,000

b. Note Payable 2,000

Interest Expense 200

Cash 2,200

c. Cash 2,000

Accounts receivable Assigned 2,000

d. Accounts Receivable Assigned 10,000

Accounts Receivable 10,000

Numbers 8-10

On December 1, 2025, Camille company assigned on a nonnotification

basis accounts receivable of P5,000,000 to a bank in

consideration for a loan of 80% of the account less a 5% service

fee on the account assigned. The entity signed a note for the

bank loan.

On December 31, 2025, the entity collected assigned accounts of

P2,000,000 less discount of P200,000. The entity 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. The

entity accepted sales returns of P100,000 on the assigned

accounts and wrote off assigned accounts totaling P300,000.

8. What is the balance of accounts receivable assigned on

December 31, 2025?

a. 3,000,000 c. 2,400,000

b. 2,600,000 d. 2,900,000

9. What is the carrying amount of the note payable on

December 31, 2025?

a. 2,240,000 c. 4,000,000

b. 2,000,000 d. 2,200,000

10. What is the equity of the assignor in assigned accounts on

December 31, 2025?

a. 2,600,000 c. 360,000

b. 2,240,000 d. 0

Factoring

11. Which of the following is true when accounts receivable

are factored without recourse?

a. The transaction may be accounted for either as a

secured borrowing or as a sale.

b. The receivables are used as collateral for a

promissory note issued to the factor.

c. The factor assumes the risk of collectibility and

absorbs any credit losses in collecting the accounts

receivable.

d. The financing cost should be recognized ratably over

the collection period.

12. Factoring of receivable is usually done on a

a. With recourse, notification basis

b. Without recourse, notification basis

c. With recourse, non-notification basis

d. Without recourse, non-notification basis

13. It is a predetermined amount withheld by a factor as a

protection against customer returns, allowances and other

special adjustments

a. Equity in assigned accounts

b. Service charge

c. Factor's holdback

d. Loss on factoring