TRADE AND OTHER RECEIVABLES

1. Receivables are financial assets because they are:

a. Cash equivalents.
b. Equity instruments of another entity.
c. Contractual rights to receive cash or another financial asset from another
entity.
d. Contractual rights to exchange financial assets or financial liabilities with
another entity under conditions that are potentially favorable to the entity.

Trade Receivables – refer to claims arising from sale of merchandise or services in the
ordinary course of business.

Non-Trade Receivables – represents claims arising from sources other than the sale of
merchandise or services in the ordinary course of business.
➢ Advances to suppliers
➢ Subscription receivable
➢ Accrued income
➢ Creditors’ accounts with debit balances

2. Receivables not measured initially at their transaction price are measured initially
at
a. Fair value
b. Fair value less costs to sell
c. Fair value minus transaction costs that are directly attributable to the
acquisition of the financial asset.
d. Fair value plus transaction costs that are directly attributable to the acquisition
of the financial asset.

3. The ideal measure of short-term receivables in thestatement of financial position

is the discounted value of the cash to be received in the future, failure tofollow
this practice usually does not make thestatement of financial position misleading
because:
a. The amount of the discount is not material.
b. Most short-term receivables are not interestbearing.
c. The allowance for uncollectible accounts includes a discount element.
d. Most receivables can be sold to a bank or factor.

4. Accounts receivable are normally reported at the:

a. Present value of future cash receipts.
b. Current value plus accrued interest.
c. Expected amount to be received.
d. Current value less expected collection costs.

Accounts Receivable XXX

Less: Allowance for doubtful accounts (XXX)
Allowance for sales discounts (XXX)
Allowance for sales returns (XXX)
Allowance for freight (XXX)
Net Realizable Value XXX
5.The following information pertains to an entity’s accounts receivable:
Accounts receivable, beginning 3,800,000
Credit sales 18,000,000
Sales returns 280,000
Collections 15,300,000
Promissory notes received in payment of accounts receivable 2,000,000
Accounts receivable written off as uncollectible 160,000
Collections on accounts previously written off 60,000
Accounts receivable used as collateral 1,000,000

The entity’s accounts receivable balance at the end of the period is:
a. P6,060,000 c. P3,060,000
b. P4,060,000 d. P3,000,000

6. An entity provided the following information for 2022:

Accounts receivable – January 1 2,000,000

Credit sales 10,000,000
Collection from customers, excluding recovery of accounts 8,000,000
written off
Accounts written off as worthless 100,000
Sales returns 500,000
Recovery of accounts written off 50,000
Estimated future sales returns on December 31 150,000
Estimated uncollectible accounts on December 31 per aging 300,000

What is the amortized cost of accounts receivable on December 31, 2022?

a. 3,400,000
b. 3,100,000
c. 2,950,000
d. 2,900,000

Accounting for Freight:

Who should pay? Who actually paid?
Buyer FOB shipping point Freight collect
Seller FOB destination Freight prepaid
Deduct from AR FOB destination Freight collect
Add to AR FOB shipping point Freight prepaid

Gross and Net method of recording sales

Gross Net
Cash discounts Deducted from sales when Deducted from sales
granted whether granted or not
Cash discounts granted Deducted from sales Not accounted separately
(sales discounts) since already deducted
from sales
Cash discounts not Included in sales Reported as other income
granted (forfeited sales discounts)
 7. On June 9, Seller Corp. sold merchandise with a list price of P5,000 to Buyer on
account. Seller allowed trade discounts of 30% and 20%. Credit terms were
2/15, n/40 and the sale was made FOB shipping point. Seller prepaid P200 of
delivery costs for Buyer as an accommodation. On June 25, Seller received
from Buyer a remittance in full payment amounting to
a. P2,744 c. P2,944
b. P2,940 d. P3,000

8. The Bibi Company uses the net price method of accounting for cash discounts.
In one of its transactions on December 15, Bibi sold merchandise with a list
price of P500,000 to a client who was given a trade discount of 20% and 15%.
Credit terms were 2/10, n/30. The goods were shipped FOB destination,
freight collect. On December 20, the client returned damaged goods originally
billed at P60,000. Total freight charges paid by the buyer amounted to P7,500.
What is the net realizable value of this receivable on December 31?
a. P272,500 c. P280,000
b. P274,400 d. P333,200

Direct write-off vs. Allowance method

Direct write-off Allowance

Doubtful of collection No journal entry DAE
ADA
Definitely uncollectible DAE ADA
AR AR
Recovery Cash AR
Bad debt recovery ADA

Cash
AR

Accounting for doubtful accounts

Profit or loss approach

- Percentage of sales

Statement of financial statement approach

- Percentage of receivables
- Aging

9. Bangag Company provides for doubtful accounts expense at the rate of 3

percent of credit sales. The following data are available for the current year:

Allow. for Doubtful Accounts, Jan. 1 P 54,000

Accounts written off as uncollectible 60,000
Collection of accounts written off 15,000
Credit sales, year-ended December 31 3,000,000

The allowance for doubtful accounts balance at December 31, after adjusting
entries, should be
a. P45,000 c. P90,000
b. P84,000 d. P99,000
 10. What is the effect on net income at the time of the collection of an account
previously written off under each of the following methods?
Direct write-off Allowance method
a. No effect Increase
b. Increase Increase
c. Increase No effect
d. No effect No effect

During the current year, an entity reported beginning allowance for doubtful accounts of
P 200,000, sales of P 9,500,000, sales returns and allowances of P 1,000,000, sales
discounts of P 500,000, accounts written off P 300,000 and recovery of accounts written
off P 50,000. It is estimated that 5% of net sales may prove uncollectible.

11. What amount should be reported as doubtful accounts expense?

a. 400,000
b. 425,000
c. 450,000
d. 475,000
12. What is the ending balance for doubtful accounts?
a. 350,000
b. 375,000
c. 400,000
d. 300,000

On December 31, 2019, an entity reported accounts receivable of P 6,000,000 and

allowance for doubtful accounts of P 1,000,000 on January 1, 2019.

Net credit sales Write-offs Recoveries

2016 9,000,000 400,000 30,000
2017 12,000,000 600,000 70,000
2018 15,000,000 700,000 120,000
2019 20,000,000 650,000 150,000

Doubtful accounts are provided for as percentage of net credit sales. The percentage is
computed annually by using the data of the three years prior to the current year.

13. What amount should be reported as doubtful accounts expense for 2019?
a. 800,000
b. 650,000
c. 500,000
d. 600,000
14. What is the allowance for doubtful accounts on December 31, 2019?
a. 1,300,000
b. 1,950,000
c. 1,150,000
d. 1,800,000
An entity provided the following accounts abstracted from the unadjusted trial balance at
year-end:

Debit Credit
Accounts Receivable 5,000,000
Allowance for doubtful accounts 50,000
Net credit sales 20,000

The entity estimated that 3% of the gross accounts receivable will become uncollectible.

15. What amount should be recognized as doubtful accounts expense for the current
year?
a. 100,000
b. 150,000
c. 200,000
d. 600,000

16. Patricia Company adopted a new method for estimated doubtful accounts at an
amount indicated by aging of accounts receivable.

Allowance for doubtful accounts – January 1 250,000

Provision for doubtful accounts recorded during the year
(2% of credit sales of 10,000,000) 200,000
Accounts written off 205,000
Uncollectible accounts per aging December 31 220,000

What is the year-end adjustment to the allowance for doubtful accounts?

a. 175,000 debit
b. 175,000 credit
c. 25,000 debit
d. 25,000 credit

17. Dadi Company reported accounts receivable P 8,000,000 on December 31, 2019
and allowance for doubtful accounts P 1,000,000 on January 1, 2019. During the
year, accounts P 400,000 were written off and recoveries of accounts written off
totaled P 100,000.

Amount Uncollectible
Under 30 days 5,000,000.00 10%
31-180 days 1,500,000.00 20%
181-360 days 1,000,000.00 50%
More than one year 500,000.00 100%

What amount should be reported as doubtful accounts expense for the current
year?
a. 1,800,000
b. 1,100,000
c. 1,000,000
d. 1,400,000
 18. Kamote Corp. has the following data relating to accounts receivable for the year
ended Dec. 31, 2022:
Accounts receivable, Jan. 1, 2022 P480,000
Allowance for doubtful accounts, Jan. 1, 2022 19,200
Sales during the year, all on account, terms 2/10, 1/15, n/60 2,400,000
Cash received from customers during the year 2,560,000
Accounts written off during the year 17,600
An analysis of cash received from customers during the year revealed that
P1,411,200 was received from customers availing the 10-day discount period,
P792,000 from customers availing the 15-day discountperiod, P4,800 represented
recovery of accounts written-off, and the balance was received from customers
paying beyond the discount period.
The allowance for doubtful accounts is adjusted so that it represents certain
percentage of the outstanding accounts receivable at year end. The required
percentage at Dec. 31, 2022 is 125% of the rate used on Dec. 31, 2021.
The doubtful accounts expense for 2022 is
a. P6,880 c. P8,720
b. P7,120 d. P8,960