Notes Receivables a.

Dishonored Notes
b. Concept of time value of money
Theories: c. Non-interest bearing note
1. An unconditional promise in writing made by d. Future Value of an Annuity
one person to another, signed by the maker,
engaging to pay on demand or at a fixed 8. Claims supported by formal promises to pay
determinable future time of a sum certain usually in the form of notes.
money to order or to bearer. a. Notes receivable
a. Notes receivable b. Dishonored notes
b. Dishonored notes c. Negotiable Promissory Note
c. Negotiable Promissory Note d. Interest-bearing Notes receivable
d. Interest-bearing Notes receivable 9. Subsequent Measurement of Long-Term Notes
2. Obtained from the sale of goods or services in Receivable Shall be measured at Amortized Cost
the ordinary course of business. using the effective interest method.
a. Interest-bearing Notes receivable a. True
b. Trade Notes Receivables b. False
c. Non-trade Notes Receivables c. Either of the above
d. Dishonored Notes d. None of the above
3. Short-term notes receivables are measured at
present value plus transaction cost. 10. Nonintereset-bearing note are measured at
a. True Face Value which is actually the Present value
b. False upon issuance.
c. Either of the above a.True
d. None of the above b. False
4. This answers the question, “If I deposit 1 peso c. Either of the above
today, how much will it be worth in the future?” d. None of the above
a. Present Value of P1
b. Future Value of P1
c. Present Value of annuity due of P1
d. Future Value of annuity due of P1
5. Notes Receivable shall be measured initially at
fair value plus transaction cost.
a. True
b. False
c. Either of the above
d. None of the above
6. It is the sum of all future cash flows discounted
using the prevailing market rate of interest for
similar notes.
a. Notes Receivables
b. Face Value
c. Dishonored Notes
d. Present Value
7. Provides that contractual agreements to receive
cash (or to pay cash) in the future will earn (or
incur) interests due to passage of time.
 PV of ordinary annuity of 1 at 12% for 10 periods 5.650

Problems: 6. On December 31, 2016, what is the carrying

On December 31, 2017, Feast Company sold used
equipment with carrying amount of P2,000,000 in
exchange of requiring ten annual payments of
P500,000. The first payment was made on December
31, 2018. The market interest for similar note was 12%.
The present value of an ordinary annuity of 1 at 12% is
5.65 for ten periods and 5.33 for nine periods.
1. What is the carrying amount of the note
receivable on December 31, 2017?
Joy deposited P10,000 today. The deposit earns 10%
interest compounded annually.
amount of the note receivable?
7. What is the gain on sale of equipment to be
recognized in 2016?
On January 1, 2017, Lifeline Company sold goods to
Wake Company. Wake signed a noninterest-bearing
note requiring payment of P600,000 annually for seven
years. The first payment was made on January 1, 2017.
The prevailing rate of interest for this type of note at
date of issuance was 10%.
PV of an ordinary annuity of 1 at 10% for 6 periods 4.36
PV of an ordinary annuity of 1 at 10% for 7 periods 4.87
8. What is the carrying amount of the note
receivable on January 1, 2017?

2. How much will Joy’s deposit be worth after 3 9. What is the interest income for 2017?
years?

Ethan Company purchased from JM company a

An entity owned a tract of land costing P800,00 and
sold the land for P1,000,00. The entity received a 3-year
note for P1,000,000 plus interest of 12% compounded
annually.
3. How much is the gain on sale of the land?
4. How much is the interest income on the date
of sale?
P2,000,000, 8%, five-year note that required five equal
annual year-end paymenrs of P500,900. The note was
discounted to yield a 9% rate to Ethan Company.
At the date of purchase, Ethan Company recorded the
note at the present value of P1, 948,500.
10. What is the total interest revenue earned by
Ethan Company over the life of this note?

Oceans Company has an 8% note receivable dated June

30, 2017, in the original amount of P1,5000,000.

Payments of P500,000 in principal plus accrued interest

are due annually on July 1, 2018, 2019, 2020.

5. What is the balance of note receivable on July

1, 2018?

On December 31, 2016, Wonder Company sold an

equipment with carrying amount of P2,000,000 and
received a noninterest-bearing note requiring payment
of P500,000 annually for ten years. The first payment is
due December 31, 2017. The prevailing market rate for
this type is 12%.

PV of 1 at 12% for 12 periods 0.322