Receivables Part 1 Drills

THEORY d. Most receivables can be sold to a bank or factor.

1. All of the following are required when classifying receivables,
7. Credit balances in accounts receivable should be classified as
except a. Current liability
a. Indicate the receivables classified as current and noncurrent. b. Part of accounts payable
b. Disclose any receivables pledged as collateral. c. Noncurrent liability
c. Disclose all significant concentrations of credit risk arising from d. Deduction from accounts receivable
receivables.
d. All of the choices are required when classifying receivables 8. A method of estimating doubtful accounts that focuses on the
income statement rather than the statement of financial
2. All of the following are problems associated with the valuation of position is the allowance method based on
accounts receivable except a. Direct write-off
a. Uncollectible accounts b. Aging of trade accounts receivable
b. Returns c. Credit sales
c. Cash discounts under the net method d. Balance of accounts receivable
d. Allowances granted
9. Estimation of uncollectible accounts receivable based on a
3. Trade discounts are percentage of sales
a. Not recorded in the accounts but rather a means of computing a. Emphasizes measurement of net realizable value of accounts
a price receivable
b. Used to avoid frequent changes in catalogs. b. Emphasizes measurement of bad debts expense
c. Used to quote prices for different quantities purchased. c. Emphasizes measurement of total assets
d. All of these describe trade discounts d. Is only acceptable for tax purpose
4. Trade receivables are classified as current assets when they are 10. Which of the following methods of determining annual bad debt
reasonably expected to be collected expense best achieves the matching concept?
a. Within one year a. Percentage of sales
b. Within the normal operating cycle b. Percentage of ending accounts receivable
c. Within one year or within the normal operating cycle, whichever c. Percentage of average accounts receivable
is shorter d. Direct write off
d. Within one year or within the normal operating cycle, whichever
is longer 11. A method of estimating doubtful accounts that emphasizes
asset valuation rather than income measurement is allowance
5. Nontrade receivables are classified as current assets when they are method based on
reasonably expected to be realized in cash a. Aging of accounts receivable
a. Within one year or normal operating cycle, whichever is shorter b. Direct write off
b. Within the normal operating cycle c. Gross sales
c. Within one year or within the normal operating cycle, whichever d. Credit sales less sales returns and allowances.
is longer
d. Within one year, the length of the operating cycle 12. Which of the following is not permitted for accounting for material
notwithstanding amount of uncollectible account receivable?
a. Percentage of accounts receivable using allowance method
6. The ideal measure of short-term receivables is the discounted b. Percentage of sales using allowance method
value of cash to be received in the future. Failure to follow this c. Direct writeoff method
practice usually does not make the statement of financial
d. All of the choices are acceptable
position misleading because
a. Most short-term receivables are noninterest bearing. 13. Which concept relates to the allowance method in accounting for
b. The allowance for uncollectible accounts includes a discount accounts receivable?
element. a. Bad debt expense is an estimate that is based on historical and
c. The amount of the discount is not material prospective information
Receivables Part 1 Drills
b. Bad debt expense is based on the actual amounts determined 1. The January 1, 2024 statement of financial position of Apple
to be uncollectible Company shows:
c. Bad debt expense is an estimate that is based only on an
aging analysis of accounts receivable Accounts receivables P2,000,000
d. Bad debt expenses is management’s determination Allowance for doubtful accounts 100,000
of which accounts will be sent to the attorney for
collection
14. Which of the following methods of determining bad debt Additional information for 2024:
expense does not properly match expense and revenue? 1. Cash sales of the company amount to P800,000 and represent
a. Charging bad debts with a percentage of sales under the 10% of gross sales.
allowance method. 2. Ninety percent of the credit sales customers do not take
b. Charging bad debts using a percentage of accounts receivable advantage of the 5/10, n/30 terms.
under the allowance method. 3. Customers who did not take advantage of the discount paid
c. Charging bad debts using aging accounts receivable under P5,940,000.
the allowance method 4. It is expected that cash discounts of P10,000 will be taken on
d. Charging bad debts as accounts are written off as accounts receivable outstanding at December 31, 2024.
uncollectible. 5. Sales returns in 2024 amounted to P80,000. All returns were from
charge sales.
15. An entity uses the allowance method for recognizing 6. During 2024 accounts totaling P60,000 were written off
doubtful accounts. The entry to record the writeoff of a as uncollectible. Recoveries during the year amounted to
specific uncollectible account P10,000. This amount is not included in the foregoing
a. Affects neither net income nor working capital. collections.
b. Affects neither net income nor accounts receivable. 7. The allowance for doubtful accounts is adjusted so that it
c. Decrease both net income and working capital represent a certain percentage of the outstanding accounts
d. Decreases both net income and accounts receivable receivable at year end.
16. When the direct writeoff method is used, the entry to write off a What is the net realizable value of accounts receivable on December 31,
specific customer account would 2024?
a. Increase net income a. P2,460,000 c. P2,390,000
b. Have no effect on net income b. P2,337,000 d. P2,410,000
c. Increase both accounts receivable and net income
2. The Bicol Company uses the net price method of accounting for
d. Decrease both accounts receivable and net income
cash discounts. In one of its transactions on December 15,
17. Accounting for imputed interest on a noninterest bearing 2024, Bicol sold merchandise with a list price of P1,000,000 to a
note receivable is an example of what aspect of client who was given a trade discount of 20% and 15%. Credit
accounting theory? terms were 2/10, n/30. The goods were shipped FOB destination,
a. Matching freight collect. Total freight charges paid by the client amounted
b. Verifiability to P15,000. On December 20, 2024, the client returned
c. Substance over form damaged goods originally billed at P120,000.
d. Accounting entity What is the net realizable value of accounts receivable on December 31,
18. What is imputed interest? 2024?
a. Interest based on stated interest rate a. P545,000 b. P680,000 c. P563,800 d. P533,800
b. Interest based on implicit interest rate 3. On December 31, 2024 the accounts receivable control
c. Interest based on average interest rate account of Alex Incorporated had a balance of P181,000. An
d. Interest rate based on bank prime rate analysis of the accounts receivable account showed the
following:
PROBLEMS
Receivables Part 1 Drills
Accounts known to be worthless P 2,500 December 31, 2024?
a. P553,500 c. P577,500
Advance payments to creditors on purchase orders 10,000 b. P582,000 d. P558,000
Advances to affiliated companies 25,000 5. On June 9, 2024, Gelli Corp. sold merchandise with a list price of
P5,000 to Michelle on account. Gelli allowed trade discounts of
Customers’ accounts reporting credit balance arising (15,000) 30% and 20%. Credit terms were 2/15, n/40 and the sale was
from sales return made FOB shipping point. Gelli prepaid P200 of delivery costs for
Interest receivable on bonds 10,000 Michelle as an accommodation. On June 25, 2024, Gelli received
from Michelle a remittance in full payment amounting to
Other trade accounts receivable – unassigned 50,000
a. P2,744 c. P2,944
Subscriptions receivable for ordinary share capital due 55,000 b. P2,940 d. P3,000
in 30 days 6. Kyle Company had the following information relating to its accounts
Trade accounts receivable – assigned 15,000 receivable:
Trade installment receivable due 1 – 18 months, Accounts receivable at 12/31/2023 P1,300,000
(including unearned
Credit sales for 2024 5,400,000
finance charges, P2,000) 22,000
Collections from customers for 2024, excluding 4,750,000
Trade receivables from officers, due currently 1,500 recovery
Trade accounts on which post-dated checks are held Accounts written off 9/30/2024 125,000
(no entries were Collection of accounts written off in prior year
made on receipts of checks) 5,000 (customer credit was not reestablished) 25,000
Total P181,000 Estimated uncollectible receivables per aging of
receivables at 12/31/2024 165,000
The correct balance of trade accounts receivable of Alex on December
31, 2024 is On December 31, 2024, the amortized cost of accounts receivable
a. P 86,500 c. P 91,500 is
b. P103,500 d. P206,000 a. P1,825,000 c. P1,635,000
4. The unadjusted trial balance of Mia Company as at December b. P1,800,000 d. P1,660,000
31, 2024 showed Accounts Receivable-trade with a balance of 7. Certain information relative to the operation of Kuruma Inc. follows:
P693,000. Investigation revealed that it included amounts due
Accounts receivable, January 1 P 800,000
from officers – P75,000; claim pending against freight company –
P9,000; and refund on insurance policy – P4,500. According to the Account receivable collected 2,600,000
subsidiary ledger which have been thoroughly checked and Cash sales 500,000
rechecked, the trade accounts receivable totaled P600,000 Inventory, January 1 1,200,000
(composed of current accounts – P375,000; two-month accounts – Inventory, December 31 1,100,000
P120,000; and accounts three months or more – P105,000). Purchases 2,000,000
Responsible officials have acknowledged definite uncollectibility Gross profit on sales 900,000
of three-month accounts with balance totaling P22,500; they What is the accounts receivable balance at December 31?
have expressed doubt with respect to an additional P24,000
worth of accounts in the same category; and they consider all a. P1,700,000 c. P1,200,000
other accounts collectible. b. P1,300,000 d. P 700,000
At what net realizable value should the Accounts Receivable- 8. Sekai Company sells to wholesalers on terms of 5/15, net 30.
trade be carried in the balance sheet of the company as of Sekai has no cash sale but 50% of customers take advantage of
Receivables Part 1 Drills
the discount. Sekai uses the gross method of recording sales. value of 1 due in nine months, 0.93, and present value of 1 due
An analysis of trade receivables at December 31, 2024 revealed in five years, 0.62. At what amounts should these two notes
the following: receivable be reported in Alfredo’s December 31, 2024
statement of financial position?
Age Amount Collectible
Cruz
0 – 15 days P15,000,000 100%
Cortez
16 – 30 days 3,000,000 95%
a. P4,650,000 P3,100,000
Over 30 days 2,000,000 P1,500,000
b. P5,000,000 P3,720,000
On the December 31, 2024, what amount should be reported as c. P5,000,000 P3,100,000
allowance for discounts? d. P4,836,000 P3,720,000
a. P750,000 c. P375,000
b. P650,000 d. P500,000 Use the following information for the next two questions.
On December 31, 2024, Baliwag Corporation sold for P50,000 an
9. Tin-Tin Corporation's books disclosed the following information for old machine having an original cost of P90,000 and a carrying
the year ended December 31, 2024: amount of P40,000. The terms of the sale were as follows: 1)
Net credit sales P1,500,000 P10,000 down payment; and 2) P20,000 payable on December
Net cash sales 240,000 31 each of the next two years.
Accounts Receivable at beginning of year 200,000 The agreement of sale made no mention of interest; however, 9%
Accounts Receivable at end of year 400,000 would be a fair rate for this type of transaction.
Tin-Tin's accounts receivable turnover is 12. How much should be recognized as gain on sale of machine?
a. 3.75 times c. 4.35 times a. P10,000 c. P5,182
b. 5.00 times d. 5.80 times b. P14,818 d. P 0
10. Tambobong Company received a seven-year zero-interest- 13. How much should be recognized as interest income in 2025
bearing note on February 22, 2024, in exchange for property it related to above transaction?
sold to Cabungaoan Company. There was no established a. P3,166 c. P4,066
exchange price for this property and the note has no ready b. P2,415 d. P 0
market. The prevailing rate of interest for a note of this type was 7%
14. On December 30, 2024, Jacq Co. sold a machine to Xang Co. in
on February 22, 2024, 7.5% on December 31, 2024, 7.7% on
exchange for a noninterest-bearing note requiring ten annual
February 22, 2025, and 8% on December 31, 2025. What interest
payments of P10,000. Door made the first payment on
rate should be used to calculate the interest revenue from this
December 30, 2024. The market interest rate for similar notes at
transaction for the years ended December 31, 2024 and 2025,
date of issuance was 8%. Information on present value factors is
respectively?
as follows:
a. 0% and 0% c. 7% and 7%
b. 7% and 7.7% d. 7.5% and 8% Present Value Present Value of
Period of 1 at 8% Ordinary Annuity of 1
11. On December 31, 2024, Alfredo Company received two
at 8%
P5,000,000 notes receivable from customers in exchanged for
9 0.50 6.25
consulting services rendered. On both notes, interest is
calculated on the outstanding principal balance at the annual 10 0.46 6.71
rate of 4% and payable at maturity. The note from Cortez In its December 31, 2024 statement of financial position, what
Corporation, made under customary trade terms, is due on amount should Jacq report as note receivable?
October 1, 2025 and the note from Cruz Corporation is due on a. P45,000 c. P62,500
December 31, 2029. The market interest rate for similar notes on b. P46,000 d. P67,100
December 31, 2024 was 10%. The compound interest factors to
convert future value into present value at 10% follow: present
15. Angie Company uses the balance sheet approach in estimating
Receivables Part 1 Drills
uncollectible accounts expense. The company prepares an
adjusting entry to recognize this expense at the end of each
month. During the month of July, the company wrote off a
P1,000 receivable and made no recoveries of previous write-offs.
Following the adjusting entry for July, the credit balance in the
Allowance for Doubtful Accounts was P2,500 larger than it was on
July 1. What amount of uncollectible account expense was
recorded for July?
A. P2,500 c. P1,500
B. P1,000 d. P3,500

16. On January 1, 2024, the balance of accounts receivable of

Jen Company was P5,000,000 and the allowance for doubtful
accounts on same date was P800,000. The following data
were gathered:
Credit sales Writeoffs Recoveries
2021 P10,000,000 P250,000 P20,000
2022 14,000,000 400,000 30,000
2023 16,000,000 650,000 50,000
2024 25,000,000 1,100,000 145,000
Doubtful accounts are provided for as percentage of credit sales.
The accountant calculates the percentage annually by using the
experience of the three years prior to the current year. How
much should be reported as 2024 doubtful accounts expense?
a. P750,000 c. P330,000
b. P812,500 d. P875,000

END