PROBLEMS Problem 6-1 Multiple choice (AA) sLiTende receivabloe are classiSe a9 GuEreHeiaagat ey Thre rearnably expected to be collected a. Within one year. Within the normal operating em oie fhe year or within the operating eee Whichever is shorter. sa Mnhone year or within the opernling IS MBs is longer. 2. Nontrade rcsivables are casifed as cureat Sts By Nontrad reasonably expected to be realized in eat ‘Within one yar or within the operating eve, whichever is shorter 1b whiners year or within the operating fee, whichever is Jonge. ce. Within the normal operating ee & Witnin one year, the Length of the operat see notwithstanding 4 Which of the flowing statement is trie exces Which ion of recsvabes inthe atatament sf inane) position? ivables are show? separately tb. Nontrade receivables ensure of short-term receivables in the Ba teeich totaen i in Socrenet vaio ged nh ate, Faure ol 2M pedove ot make the statement of fname tileading bocause en hor-term receivables are not interest bearing. er dobttul accounts inclios assent ment. of the discount isnot material soa Sen can be 01d toa bank or factor. lances in acoounts receivable shall be classified a abilities feof accounts payable erm liabilities from accounts receivable following statements is incorrect regarding are fancilassets | SS fecal nares sdurtics are may be reported as separate ‘statement of financial position. P Meccelvabl ae written promises of the uy fbr goods or service fing should be recorded in accounts shall be classified as, current depending on the m within on yon oF over9. Where the operating cyle extends beyond 986 aa Beste of normal credit terms asin te cas of i ales household appliances “Its proper to classify the entire ceaBleaiaaasene assets with disclosure of the amount i“ sithin one year, if material The entire racivables ae shown 8 a ©. ‘The portion due in one year is shows 88 balance ae noncurrent 4. The receivables are not repented: 10. In the case of long-term installment fatate inetallment sales) where a Moe fecelvables would be collected beyon operating ele a. The entire receivables are shown a8 GUIS ‘Thaseure of the amount not currently des b, ‘The entire receivablos are shown © Only the portion curently due is shown a3: fand the balance as noneurrent. 4. Tho entire receivables are shown 83 ‘Trelosure of the amount not eurrently due Problem 6-2 Multiple choice (AICPA Adapted) 1. Which method of recording bad debt loss is epnsistent with bpecrual accounting? Allowance method Direct weiteoff method Percent of sales method Peroent of accounts receivable shod of estimating doubtful necunts that crmphasizes he fiom rather than ¥aceme measurement i= the ‘method based on ‘he accounts receivable returns and allowances munge of relating an entity's bad debt experience Me josivable is that this approach reasonably correct measurement of accounts Se ie in the suntement of financial position tad debt loss to the period of sale ely generally accepted method for measuring ints receivable Mtimaten of tncolletible accounts necessary yrance method of recognizing doubtful accounts Tent to record the weiteotT ofa specific account fance method for recognizing Aury to record the writeoft of a unt fe nor working capital Thor accounts © nd working capital and accounts reccivable wablesognizing bad den ‘an accounts receivable aging schedule is prepared, a ‘of eallaetion of 4), oP enputations ia made to determine the estimated oie gosounts, The resulting amount from this ging 7.When the allowance method of ree expense is used, the entries a the tm account previously written off would allowance for doubtful ace 2) Have moet ont ms added tothe total acounts written off during the ©. Have noclfect on the allowance se ee nanan XL Have no effet on net sncome r ot eet alan nt of doubMul accounts expense forthe yene 8, Anentity uses the allowance method arama that should be added to the beginning scouts expense, What isthe impacto sao fn a ee a recount previously wntten of? nace fr doubt eee Jesited credit balance ofthe allowance to be reported at yearend a. Decrease the for d a. No eflect on both allowance for doubt b. Noveffect on allowance for dowbtful ssa JQeovnse in doubtful accounts expense ‘a, Increase in allowance for doubtful the following methods of determining bad debt es not mateh expense and revenue? clfect on doubtful accounts expense 4, Increare in allowance for doulbstull #ee0 sae come 8 inate 9, When a epecifie customer's account receivable is wit Dad debts with a percentage of accounts ‘effect on net income? Tunder the allowance method ff as uncollectibe, what wil be the wy didebis with an amount derived from aging No effect under both allowance method and direct {5 receivable under the allowance method debts as accounts are written off as writeoff method Ri Decrease under both allowance: and direst ‘writeoff method [No effect under allowance m direct writeoff method |. Decrease under allowance for doubtful accounts as a wable. for doubtful accounts by8 When the allowance method of recognizing bad debt expense is used, the allowance for doubtful aesounts ‘would decrease when Specific account receivable is collested Account previously writen offi elected, Account previously written off becomes eallestible “A, Specific tncollecuible account is writen 4. Why is the allowance method preferred over the direct ‘writeoff method of acwunting for bad debts? ‘4. Allowance method is used for tx purpose) b, Estimates are used. ©. Determining worthless nceounts under d method is difioult to do, {4 Improved matching of bad debt expense with sachioved, 5. Which of the fallowing je not acceptable in tuncollectible aoounts receivable? a The estimate of uncollecible accounts is percentage of sales forthe period bb The estimate of uncollectible aceounta pereentage of the noeounts receivable period. e. The estimate of unclletible ‘aging schedule ad. No estimate of uncollectible Net income insllaable value of accounts receivable rking capital iry debiting accounts roccivable and crediting a ae peul accounts would be mde when 1 pays its account balance er defaults on its account. mialy defaulted customer pays its outstanding ce lanigied uncollectible receivables are too low Dpalance in the allowance for doubtful accounts the result of management not providing large fallowanee in order to manage earnings eur before the end-of-period adjustment for etible accounts leven after the end-of-period adjustment for eetible accounts. swriteoff method of recognizing bad debt the entry to write off a specific customer net income ‘receivable balance and increase unis receivable balance andProblem 6-24 (PHILCPA Adapted) 1m 6-26 (AICPA Adapted) On December 31, 2012, the accounts rect e ea. s receivable showed the following: ; 1, 2012 statement of financial postion of {he current receivables consisted of the 2000000 Accouteknowntobe worthless 100000 ag nce payments tocreditorson purchase orders 40,000 Advances to alia 0000 I rom ale eturne (e00,000 : rntat 150% of cot Interest ecnvablson bonds ‘gjooo eet betes! Trade scents esiable ‘3s0q000 mame incription reser dunn 30 days 2200000 “Trade ineallmenteroceerbe due 118 months <= ‘rcluding uneered aan charge of P0000 ‘000 ‘Trajesoannterecereable rom for duo curently 190000, Jal amount should be reported as current trade and Tae acsuntson whieh potted checks areal abies? (oo entree were made on eet of chad) onao0 What isthe correct balance of trade accounts reeaivable® a. 4,650,000 bo wb 4:700,000 4150.00 (CPA Adapted) 44. 41050,000 on relates to accounts receivable of Problem 6-25 (IAA) 1,300,000 ‘Vagabond Company bad net sales in 2012 of 5.300,000 ‘December 31, 2012, before adjusting entries a. selected accounts were accounts receivable P a ‘nd allowance for dof account PD December 0.000 [Gatimated that 5% ofits accounts ater i ° What is the cash Miapersgingstyearcad 250,000 3 not realizable value of 3, 20127Problem 6-2 blem 6-28 (AICPA Adapted) mn 6-80 (AICPA Adapted) ry 12012, Malice Company's allowance for doubtful Rapture Comy {pture Company had the follwing information ft 3012 MPa a credit balance of P00.000, During 2012, the Ber esti acesn pee wee Jeu eit may simone Fee ee corm 0 00 ot et pies et me fn ingrecevery 70.000 Scounts writen fin priya (customer creditwas not estaba) Examen PA What i the balance of accounts receivable, before {or doubtfal azounts, on Decomber 81, 20122 a. 1,825,000 4 Pp %. 11850,000 s1 (AICPA Adapted) ©, 1,950,000. $, oe 4 ny prepared an aging ofits accounts receivable it 2012 and determined that the not realizable - Dunte receivable was P2,500,000. Additional Problem 6-29 (IAA) BB i [At the end of its fist year of operations, Doss je accounts on January 1 280,000 ‘Majeade Company had accounts receivable of Ur the related allowence for doubtful accounts 250,000 {he entity recorded charges to bad debt pt De 2,700,000, fd wrote off P200,000 of uncollectible re i 30,000 December 2, what is the (On December 31, 2012, what amount 22 2012 whee ‘Accounts receivable before the alro ICPA Adapted) Problem 6-32 (AICPA Adapted) en y Mon: any sells to wholesalers on terms 2/15, net 30. Monsoon Company's allowance for doubt accounts ws sortna no eash sales but 50% of the customers take 200,000 at the end of 2012 and P180,000 atthe end of 2011. B Mf the discount. An analysis of the accounts ‘or the year ended December 31, 2012, Monsoon. Company ousidered collectible on Decomber 31, 2012 reported doubtful accounts expense of P50,000. following: 500,000 100% What amount did the entity debit tothe appropriate aesount 3,000,000 28 12 to write off actual bad debts? "250,000 0% a. 30,000, 50,000 4. 70,000 Problem 6-88 (AICPA Adapted) ‘The following information pertains to Tantrum COmpaBY’ rnocounts receivable on December 31, 2012, Daye Batimated , 2012, Ludicrous Company reported before outstanding Amount ‘adjustments accounta receivable of P6,000,000 o = 1.200.000 . ubtful accounts of P300,000, & > Bo ‘0 000 wg Ome 120 so.000 Proba ts ofcollection 6 so using 2012, the enity wrote off P70,000 es Pcie and resovered P2000 that ad f % FeeerSjenrs. The December 31, 2031 al ; & Mcolcctble acsunta wae P0,000 appropriate balance for the ‘on December 31, 2012?Problem 6-36 (AICPA Adapted) The following accounts were abstracted from Namesake Company's unadjusted trial balance on December 81, 2012 Debit Cree 308 Accountacsvab 31000060 190.000 Allowance for doubt acount 10000 sano) Netcreditelee ‘005,000 00 ‘The entity estimated that 3% of the gross account receivable will become uncollectible, What amount should be reported as doubtful aesounta ‘expense for 2012? corded doubtful accounts expense at the rate of lies, What amount should be reported as Ge doubtful accounts on December 21° Problem 6-87 (AICPA Adapted) (AICPA Adapted) Bestial Company's trial belance om December Hite year ended December 31, 2012, Fateful Included the flowing accounts: new aesounting method for estimating é ubtful accounts at the amount indicated ff accounts receivable. The following Allowance for doubtful accounts eae 250,000, ‘The entity estimated its un 200,000 : 205,000 sper aging,December31 220,000 What is the doubtful accountsProblem 6-40 (AA) The foll The following information is available for Gruesome Company lable Oa Allowance fr doubifl acnuntson December 3120115350608 Credit alos during 2012 ‘000,000, Scouts receivable deemed worthless and ‘wnitton off during 2012 00,000 As a result of a review and aging of acsounts receivable i arly January 2013 it has been detormined that an allowanes for doubefal accounts of P400,000 is needed. on Decembae SIy 12, What amount thould be rooorded as doubt “2 expense for 20127 2 400000 % son. i & Sea. : §, $e. Problem 6-41 (IAA) Bizarre Company reported accounts receivable oa Dems 51, 2012 as follows: a ‘Aye Company Bee Company (Cee Company Day Company ‘Rother sceounts receivable ‘Tho entity. jem 6-42 (PHILCPA Adapted) ray Company started its business on January 1, 2012 Goring the collection experience of other entities der ye entity eatablished an allowance for bad sty oe of credit sales. Outstanding accounts mate {ed on Decombor 31, 2012 totaled P115,000, Haswange for bad debis account had a credit balance ewan Grording estimated doubtful accounts OD ateember and after writing off P2,500 of jibe accounts. Manlysis of the entity's accounts showed that gai oF iy 2012 amounted to PAS0,000 and y Minventory was P75,000. Goods were sold ‘amounted to 80% of total sales, Total sinew on the other hand, excluding cash tions on accounts receivable for bad debts? ccivable Allowance for bad debts 6,000 understated 18500 understated 10,000 understated 12,600 understated tthe allowance method of accounting ounts. During 2012, the entity had didebt expense, and wrote off accounts ‘uncollectbie, i capital as a result of the receivable?a jing transactions eee Sscoventa rece a adjusts pany reported the following balances after uo pe oni gn ret hem atin sam Salen aetna ag gm Ames peer 3.2/0 ie P16) 000 snd soloed Past onan onc 200 Previous years. aven to cash customers for sales aso What amount should be reported as doubtful accounts (not included in panes for tho ear ended Dreenbee a]: 01 a aac sooo 198000 BN fe pens on te Deceer 21, & ao ireendl estos &. 150000 “3000 Problem 5igae” a for its net uncollectible account losses ing b jad debts for 2% of net credit Oasis Company followed the procedure of d for bad dobts for 2% ‘ipense fr 26 ofall ow ales. Slee for r oo years andi gegr-end allowance soy nce of accounts receivable on December follows: q Uallowance for bad debts after ‘1, 20127Problem Hblem 6-47 (AICPA Adapted) ception of operatio, Omnipotent Company" pr to December 31, 2012, ovided for wneolletible aecounts nse under the allowance method and provisions were ade monthly at 3% of eredit sales, No yearend adjustments to the allowance account were made, ‘The balance in the allowance for doubtful ecounts was £330,000 on January 1, 2012, During 2013, credit al totaled is E P20,000.000, interim provisions for doubtful accounte were E ‘made at 3% of eredit sales, P100,000 of bad debts Were writen eo ECEIVABL off, and recoveries of accounts previously written off amounted to P20,000. An aging of accounts receivable was made for the first time ‘on December 81, 2012 as follows: Agog Balance nolo o- © s2n000 a oe 1a 1 “promissory note is an. unconditional promise in 181 = 360 1,000,000, 2896 err roms ont ‘one person to another, signed by the maker, = oo a on demand or at a fixed determinable future Based on the review of collectibility of the in in money to order or to bearer. in the "over 360 days" aging category, a ‘totaling P50,000 are to be written offon D ry note is a written contract in which ‘as the maker, promises to pay another Effective with the year ended December 3 ‘payee, a definite sum of mone’ adopted a new accounting method for est allowance for doubtful accounts at