CFAS FINAL EXAM UPDATED ACTUAL QUESTIONS AND
ANSWERS
Explain discounting of notes receivable - CORRECT ANSWER✅✅✅a form of receivable financing
discounting specifically pertains to notes receivable
Who are the original parties in a promissory note? - CORRECT ANSWER✅✅✅the maker entity payee
Who are the parties involved after discounting of note receivable? - CORRECT ANSWER✅✅✅the
endorser and endorsee
Explain endorsement of a negotiable instrument - CORRECT ANSWER✅✅✅transfer of right to a
negotiable instrument by simply signing at the back of the instrument
What is the formula in computing net proceeds from discounting of note receivable? - CORRECT
ANSWER✅✅✅net proceeds = maturity value - discounts
Explain maturity value - CORRECT ANSWER✅✅✅the amount due on the note at the date of
maturity
principle + interest = maturity value
What is the formula in computing interest on the note receivable? - CORRECT
ANSWER✅✅✅computing interest = principal * rate * time
Explain discount in relation to discounting of note receivable - CORRECT ANSWER✅✅✅the amount
of interest deducted by the bank in advance
What is the formula in computing discount - CORRECT ANSWER✅✅✅discount = maturity * discount
rate * discount period
Explain the carrying amount of the note receivable upon discounting - CORRECT ANSWER✅✅✅is
recognized as gain or loss
, What is the formula in computing gain or loss on discounting of note receivable? - CORRECT
ANSWER✅✅✅Gain/Loss = net procedes - carrying amount of notes rec
Explain discounting without recourse - CORRECT ANSWER✅✅✅the sale of notes receivable is
absolute and therefore there is no contingent liability
Explain discounting with recourse accounted for as conditional sale - CORRECT
ANSWER✅✅✅recognizing a contingent liability
Explain discounting with recourse accounted for as secured borrowing - CORRECT ANSWER✅✅✅the
note receivable is not derecognize but instead an accounting liability is recorded at an amount equal to
the face amount of the notes receivable discount
What are the criteria for the derecognition of a financial asset - CORRECT ANSWER✅✅✅the entity
has substantially transferred all rewards
the entity has retained substantially all risks
the entity has lost control of the note rec
Explain fully receivable financing - CORRECT ANSWER✅✅✅the financial flexibility or capability of an
entity to raise money out of its receivables
Enumerate the four common forms of receivable financing - CORRECT ANSWER✅✅✅pledge of
accounts receivable, assignment of accounts receivable, factoring of accounts receivable, and
discounting of notes receivable
What are the forms of financing related to accounts receivable? - CORRECT ANSWER✅✅✅pledge of
accounts receivable, assignment of accounts receivable, factoring of accounts receivable
Explain pledge of accounts receivable - CORRECT ANSWER✅✅✅
ANSWERS
Explain discounting of notes receivable - CORRECT ANSWER✅✅✅a form of receivable financing
discounting specifically pertains to notes receivable
Who are the original parties in a promissory note? - CORRECT ANSWER✅✅✅the maker entity payee
Who are the parties involved after discounting of note receivable? - CORRECT ANSWER✅✅✅the
endorser and endorsee
Explain endorsement of a negotiable instrument - CORRECT ANSWER✅✅✅transfer of right to a
negotiable instrument by simply signing at the back of the instrument
What is the formula in computing net proceeds from discounting of note receivable? - CORRECT
ANSWER✅✅✅net proceeds = maturity value - discounts
Explain maturity value - CORRECT ANSWER✅✅✅the amount due on the note at the date of
maturity
principle + interest = maturity value
What is the formula in computing interest on the note receivable? - CORRECT
ANSWER✅✅✅computing interest = principal * rate * time
Explain discount in relation to discounting of note receivable - CORRECT ANSWER✅✅✅the amount
of interest deducted by the bank in advance
What is the formula in computing discount - CORRECT ANSWER✅✅✅discount = maturity * discount
rate * discount period
Explain the carrying amount of the note receivable upon discounting - CORRECT ANSWER✅✅✅is
recognized as gain or loss
, What is the formula in computing gain or loss on discounting of note receivable? - CORRECT
ANSWER✅✅✅Gain/Loss = net procedes - carrying amount of notes rec
Explain discounting without recourse - CORRECT ANSWER✅✅✅the sale of notes receivable is
absolute and therefore there is no contingent liability
Explain discounting with recourse accounted for as conditional sale - CORRECT
ANSWER✅✅✅recognizing a contingent liability
Explain discounting with recourse accounted for as secured borrowing - CORRECT ANSWER✅✅✅the
note receivable is not derecognize but instead an accounting liability is recorded at an amount equal to
the face amount of the notes receivable discount
What are the criteria for the derecognition of a financial asset - CORRECT ANSWER✅✅✅the entity
has substantially transferred all rewards
the entity has retained substantially all risks
the entity has lost control of the note rec
Explain fully receivable financing - CORRECT ANSWER✅✅✅the financial flexibility or capability of an
entity to raise money out of its receivables
Enumerate the four common forms of receivable financing - CORRECT ANSWER✅✅✅pledge of
accounts receivable, assignment of accounts receivable, factoring of accounts receivable, and
discounting of notes receivable
What are the forms of financing related to accounts receivable? - CORRECT ANSWER✅✅✅pledge of
accounts receivable, assignment of accounts receivable, factoring of accounts receivable
Explain pledge of accounts receivable - CORRECT ANSWER✅✅✅
