QUIZ#4.

BATHEOAX
1. Trade receivables are classified as current assets if reasonably expected to be collected
a. Within one year
b. Within the normal operating cycle
c. Within one year or within the operating cycle whichever is shorter.
d. Within one year or within the operating cycle whichever is longer

2. Credit balances in accounts receivable are classified as

a. Current liabilities c. Long term liabilities
b. Part of accounts payable d. Deduction from accounts receivable

3. Why is the allowance method preferred over the direct writeoff method of accounting for bad debts?
a. Allowance method is used for tax purposes
b. Estimates are used.
c. Determining worthless accounts under direct writeoff method is difficult to do.
d. Improved matching of bad debt expense with revenue

4. The entry debiting accounts receivable and crediting allowance for doubtful accounts would be
made when
a. A customer pays an account balance
b. A customer defaults on the account.
c. A previously defaulted customer pays the balance
d. Estimated uncollectible accounts are too low.

5. Which method of recording bad debt loss is consistent with accrual accounting
a. Allowance method c. Percent of sales method
b. Direct write-off method d. Percent of receivable method

6. Accounts receivable usually appear in the balance sheet

a. As current assets, combined with cash and cash equivalents
b. As current assets, immediately after cash and cash equivalents
c. As either current assets or noncurrent assets, depending on whether the allowance method or
the direct write-off method is used to account for uncollectible accounts
d. Only if the balance sheet method of estimating uncollectible accounts is used

7. When the allowance method is used, the entry to record the writeoff of a specific account would
a. Decrease both receivables and allowance
b. Decrease accounts receivable and increase allowance
c. Increase both account receivable and the allowance
d. Increase account receivable and decrease the allowance.

8-9. AICPA Adapted. On June 1, 2022, Pitt Company sold merchandise with a list price of P5,000,000 to Burr
on account. Pitt allowed trade discounts of 30% and 20%. On June 11, 2022, the customer paid in full. Credit
terms were 2/10, n/30 and the sale was made FOB shipping point. Pitt prepaid P200,000 of delivery cost for
Burr as an accommodation.
8. What amount should be reported as sales revenue?
a. P5,000,000 c. P3,500,000
b. P2,800,000 d. P2,500,000

9. What amount was received by Pitt from Burr as remittance in full?

a. P2,744,000 c. P2,944,000
b. P2,940,000 d. P3,140,000

10. AICPA Adapted. Roxy Company had the following information for the current year relating to account
receivable:
Account receivable, January 1 1,300,000
Credit Sales 5,400,000
Collections from customers, excluding recovery 4,750,000
Accounts written off 125,000
Collection of accounts written off in prior year,
customer credit was not reestablished 25,000
Estimated uncollectible receivables per aging at December 31 165,000

What amount should be reported as accounts receivable before allowance for doubtful accounts on
December 31?
a. P1,825,000 c. P1,950,000
b. P1,850,000 d. P1,990,000
11. Nontrade receivables are classified as current assets only if reasonably expected to be realized in cash
a. Within one year or within the operating cycle, whichever is shorter
b. Within one year or within the operating cycle, whichever is longer.
c. Within the normal operating cycle
d. Within one year, the length of the operating cycle notwithstanding.

12. A method of estimating bad debts that focuses on the income statement rather than the statement of financial
position is the allowance method based on
a. Direct write off c. Credit sales
b. Aging the trade accounts receivable d. Trade accounts receivable

13. Which of the following is not acceptable in estimating uncollectible accounts receivable?
a. The estimate of uncollectible accounts is based on a percentage of sales for the period.
b. The estimate of uncollectible accounts is based on a percentage of accounts receivable at the
end of a period.
c. The estimate of uncollectible accounts is based on an aging schedule.
d. No estimate of uncollectible accounts is made but accounts are written off when it is
determined that the accounts cannot be collected.

14. AICPA Adapted. Orr Company prepared an aging of accounts receivable on December 31 and
determined that the net realizable value of the accounts receivable was P2,500,000.
Accounts receivable on December 31 2,700,000
Allowance for doubtful accounts on January 1 280,000
Accounts written off as uncollectible 230,000
Recovery of accounts written off 50,000
What amount should be recognized as doubtful accounts expense for the current year?
a. P230,000 c. P150,000
b. P200,000 d. P100,000

15. AICPA Adapted. Mill Company’s allowance for doubtful accounts was P1,000,000 at the end of 2023
and P900,000 at the end of 2022. For the year ended December 31, 2023, the entity reported doubtful
accounts expense of P250,000 in the income statement. What amount was debited to the
appropriate account to write off uncollectible accounts in 2023?
a. P150,000 c. P250,000
b. P100,000 d. P350,000

16. A method of estimating uncollectible accounts that emphasizes asset valuation rather than income measurement is
the allowance method based on
a. Aging of account receivable c. Gross sales
b. Direct writeoff d. Credit sales less returns and allowances.

17. The entry debiting accounts receivable and crediting allowance for doubtful accounts would be made when
a. A customer pays an account balance.
b. A customer defaults on the accounts.
c. A previously defaulted customer pays the balance.
d. Estimated uncollectible amounts are too low.

18. When the allowance method of recognizing bad debt expense is used, the entries at the time of collection of an
account previously written off would
a. Have no effect on net income
b. Increase net income
c. Decrease the allowance for doubtful accounts
d. Have no effect on the allowance for doubtful accounts

19. Which of the following should be recorded in accounts receivable?

a. Receivables from officers c. Dividend receivable
b. Receivables from subsidiaries d. None of these

20. Assume ABC Co., an equipment distributor, sells a piece of machinery with a list price of P600,000 to
Arch Inc. Arch Inc. will pay P650,000 in one year. Royal Palm Corp. normally sells this type of
equipment for 90% of list price. How much should be recorded as revenue?
a. P540,000. c. P600,000.
b. P585,000. d. P650,000.

GOOD LUCK �