Receivables Flashcards
Receivable In General Measurement
Initial
Subsequent
Initial: Fair Value + Transaction Costs
Subsequent: Amortized Cost
Two Methods for Accounting for Bad Debts
Direct Write-off Method
Allowance Method
AR
What is most broad? Direct Write Off Method or Allowance Method?
Allowance Method
Allowance Method can further classified as:
Balance Sheet Method
Income Statement Method
Mixed
Acctg for Bad Debts
Allowance Method
Balance Sheet Method:
Percent of AR Method
Aging Method
Acctg for Bad Debts
Allowance Method
Income Statement Method
Percentage of Credit Sales Method
DAE agad
Note Receivable initial and subsequent Measurement:
Shorterm -IB___
-NIB____
Longterm - IB_____
- NIB______
ST: Face Value
LT: IB-W/ Reasonable rate: FV
IB-w/ Unresobale rate:PV
NIB:PV
All Subsequent Measurement: Amortizes Cost
With unreasonable rate means interest bering not equal to the MARKET RATE of interest
LOAN RECEIVABLE Measurement
Initial:
FV
Add: Direct Origination Costs
Less: Origination Fee
Initial Carrying Value ICV:
Subsequent: Amortized Cost
Impairment of Loans: PFRS 9 paragraph 5.2.2 in conjunction with PAS 39, par. 58, provides that an entity shall assess at every _____
End of reporting period
Loan Receivable
How to compute impairment loss?
CA of Loan Receivable
Less: PV or recoverable amount
Impairment Loss
Loan Receivable:
If: ICV greater than FV
Scenario:
Interest: Nominal vs. Effevtive Int.
Treatment on Amount:
Premium
NI greater than EI
Deduct from CA
Loan Receivable:
If: ICV Less than FV
Scenario:
Interest: Nominal vs. Effevtive Int.
Treatment on Amount:
Discount
NI less than EI
Add from CA
T or F?
Percentage of AR and Aging are the required ending balance of AFDA?
Yes. Hence the BDE for the period is Required AFDA vs. Unadjusted AFDA
Entry to Record Write Off and Recovery under both Direct and Allowance Method
Write off:
-DWOM: Dr. BDE, Cr. AR
-AM: Dr. AFDA, cr. AR
Recovery:
DWOM: Dr. AR, Cr BDE/Gain
AM: Dr. AR, Cr. AFDA
Both: Dr. Cash, Cr. AR
Percentage of Sales is required AFDA?
No.
The accounting for Loan Receivable is similar to Notes Reveivable except that____
Loan receivable typhically involved Transaction Costs
Loan Reveivable
Explain Origination Fees, Direct and Indirect Origination Costs
Origination Fees - Deducted directly from loan proceeds
Direct Origination Costs - initially added to the CA of the loan
Indirect Origination Costs - outright expense
The entry to record Orgination Fees and Direct Origination Costs
Orig Fees Received:
Dr. Cash, Cr. UNREARNED INT. INCOME
DOC: dr. Unearned Int. Income cr. Cash
But still note that deduct padin ang OF at add ang DOC sa ICV ng Loan Rec
Common forms of receivable financing are:
Pledge
Assignment
Factoring
Discounting
Also known as Hypothecation (postulate/assume)
Pledge
An____ is a formal form of pledge in which receivable assigned are specifically identified and stated in the loan contract
Assignment
Rec Financing
2 ways of assignment
Notification-customers are notified to make their payments directly to the assignee
Non notification basis-customers are not notified, hence, they will continue to pay to assignor
____ is the sale of account receivable to a bank or financial institution entity
Transfer of ownership
Factoring
Two types of Factoring
With Recourse- the transferror guarantees the payment to the factor in the event factors fail to pay
Without - the factor assumes the risk of non payment and absorbs any credit losses
Factoring if silent
WITHOUT recourse
Discounting if silent
WITH recourse
Factors Holdback
Reserve for sales returns and discounts
Withheld percentage of transferred receivable as protection against such reduction
Loss on factoring is equal to Finance Fee
TRUE
Formula for AR Net Realizable Value
AR
less: AFDA
Allowance for sales return
The Interest payable in lump sum need also to compute Present Value
True
Receivable Financing - Discounting
Discount Period is____
The remaining period to Maturity Date
Rec. Financing - Discounting
State the formulas:
Net Proceeds =
Maturity Value=
Discount Period=
Discount=
Net Proceeds= Maturity Value - Discount
Maturity Value= Principal+interest for FULL term note
Discount Period=remaining to maturity date
Discount=maturiy ValueXdiscount ratex discount perion
Receivable Financing
Discount is same with Loss?
No. Loss is balancing figure! Please remember!
