1.

Notes or accounts
receivables that result
from sales transactions
are often called
a. sales receivables.
b. non-trade receivables.
c. trade receivables.
d. merchandise
receivables
Accounts Receivable

1. Notes or accounts receivable that result from sales transactions

are often called
a. sales receivables.
b. non-trade receivables.
c. trade receivables.
d. merchandise receivables

2. The term "receivables" refers to

a. amounts due from individuals or companies.
b. merchandise to be collected from individuals or companies.
c. cash to be paid to creditors.
d. cash to be paid to debtors.

3. A cash discount is usually granted to all the following except

a. retail customers.
b. retailers.
c. wholesalers.
d. All of these are granted discounts.

4. Which one of the following is not a primary problem

associated with accounts receivable?
a. Depreciating accounts receivable
b. Recognizing accounts receivable
c. Valuing accounts receivable
d. Disposing of accounts receivable

5. Trade accounts receivable are valued and reported on the

balance sheet
a. in the investment section.
b. at gross amounts, less sales returns and allowances.
c. at net realizable value.
d. only if they are not past due

6. Three accounting issues associated with accounts receivable

are
a. depreciating, returns, and valuing.
b. depreciating, valuing, and collecting.
c. recognizing, valuing, and disposing.
d. accrual, bad debts, and disposing.

7. Which of the following would require a compound journal entry?

a. To record merchandise returned that was previously purchased
on account.
b. To record sales on account.
c. To record purchases of inventory when a discount is offered for
prompt payment.
d. To record collection of accounts receivable when a cash
discount is taken.

8. Under the allowance method, writing off an uncollectible

account
a. affects only balance sheet accounts.
b. affects both balance sheet and income statement accounts.
c. affects only income statement accounts.
d. is not acceptable practice.

9. The net amount expected to be received in cash from

receivables is termed the
a. cash realizable value.
b. cash-good value.
c. gross cash value.
d. cash-equivalent value

10. The direct write-off method

a. is acceptable for financial reporting purposes.
b. debits Allowance for Doubtful Accounts to record write-offs of
accounts.
c. shows only actual losses from uncollectible accounts
receivable.
d. estimates bad debt losses.

14. In 2008, Carpenter

Company had net credit
sales of 1,125,000. On
January 1, 2008,
Allowance for Doubtful
Accounts had a credit
balance of $27,000.
During 2008, $45,000
of uncollectible accounts
receivable were written
off. Past experience
indicates that the
allowance should be 10%
of the balance in
receivables (percentage
of receivables basis).
If the accounts receivable
balance at December 31
was $300,000, what is
the required
adjustment to the
Allowance for Doubtful
Accounts at December
31, 2008?
a. $30,000
b. $112,500
c. $48,000
d. $45,000
PROBLEM 1-2:
DAFFODIL AUTO PARTS sells new parts to auto dealers. Company policy
requires that a prenumbered shipping document be issued for each sale. At
the time of pick-up or shipment, the shipping clerk writes the date on the
shipping document. The last shipment made in the year ended December 31,
2010, was recorded on document 3167. Shipments are billed in the order
that the billing clerk receives the shipping documents.

For late December 31, 2010, and early January 2011, Shipping Documents
are billed on sales invoices as follows:

SHIPPING DOC. No. INVOICE No.

3163 5332
3164 5326
3165 5327
3166 5330
3167 5331
3168 5328
3169 5329
3170 5333
3171 5335
3172 5334
The December 2010 and January 2011 sales journal have the following
information included:

SALES JOURNAL-DECEMBER 2010

DAYS OF
MONTH SALES INVOICE No. Amount of Sale
30 5326 72,611.00
30 5329 191,430.00
31 5327 41,983.00
31 5328 62,022.00
31 5330 4,774.00

SALES JOURNAL- 2011

SALES
DAYS OF INVOICE
MONTH No. Amount of Sale
1 5332 264,131.00
1 5331 10,639.00
1 5333 85,206.00
2 5335 125,050.00
2 5334 64,658.00
1. What is the net overstatement (understatement) of Daffodil’s sale for the
year ended December 31, 2010?

A. P21,318 B. P253,452

C. (P253,452) D. (P 21,318)
SOLUTION:
December 2010 Sales
Document Understatement of
Invoice No. In Sales Cut off
No. December 31 Sales
5326 3164

5329 3169 191,430.00 overstatement

5327 3165

5328 3168 62,022.00 overstatement

5330 3166

253,452.00
January 2011 Sales

5332 3163 264,131.00 Understatement

5331 3167 10,639.00 Understatement

5333 3170
5335 3171
5334 3172

274,770.00

Answer: D. (21,318.00)

2. What adjusting entry is necessary to correct Daffodil’s financial

statements for the year ended December 31, 2010?

A. Accounts Receivable 21,318 Sales 21,318

B. Accounts Receivable 253,452 Sales 253,452

C. Sales 21,318 Accounts Receivable 21,318

D. Sales 253,452 Accounts Receivable 253,452

Solution:
Accounts receivable 21,318
Sales 21,318
Answer: A
PROBLEM 3.
Computation of Accounts Receivable Balance
The following information is from GUMAMELA CORP.’s first year of operation:
> Merchandise purchased P450,000
> Ending merchandise inventory 123,000
> Collections from customers 150,000
> All sales are on account and goods sell at 30% above cost.
3.What are the accounts receivable balance at the end of the company’s first
year of operations?

A. P275,100 C. P595,000

B. P78,900 D. P435,000

SOLUTION:
Purchases 450, 000
Less: Merchandise inventory,
ending (123,000.00)
Cost of goods sold
327,000.00
Multiply by sales ratio X 130%
Sales
425,100.00
Less : Collections from
customers (150,000.00)
Accounts receivable, ending
275,100.00
Answer: A

PROBLEM 4.
BANABA CO. reported the following information at the end of its first-year
operations, December 31, 2010:
Bad debt expense for 2010 P271,000
Uncollectible accounts written off during 2010 35,400
Net realizable value of accounts receivable 895,000
What is the accounts receivable balance at December 31, 2010?
 A. P 1,166,000

B. P930,400

C. P1,201,400

D. P1,130,600

SOLUTION 4.
Bad debt expense for 2010 271, 000
Less: Accounts Written Off during 2010 (35,400)
Allowance for bad debts, December 31, 2010, 235,600
Add: Net Realizable value of the accounts
Receivables, Dec. 31, 2010 895,000
Accounts Receivable, Dec. 31, 2010 1,130,600
Answer: D

PROBLEM 5-6.

SUNFLOWER COMPANY sells a variety of imports goods. By selling on credit, Sunflower

cannot expect to
collect 100% of its accounts receivable. At December 31, 2009, Sunflower reported the
following on its
statement of financial position:

Accounts Receivable P 2197,500

LESS: Allowance for bad debts (133,500)
Accounts receivable, net P 2,064,000

During the year ended December 31, 2010, Sunflower earned sales revenue of
P537,702,500 and
collected cash of 528,070,500 from customers. Assume bad debts expense for the year
was 1% of sales
revenue and that sunflower wrote off uncollectible accounts receivable totaling
P5,439,500.

5. What is the accounts receivable balance at December 31, 2010?

A. P 6,390,000
B. P 2197,500
C. P 11,829,500
D. P 6,318,975
6. What is the December 31, 2010, balance of the Allowance for bad debts account?

A. P 133,500 B. P 71,025
C. 61,975 D. 71,525

Solution: 5-6

Accounts Receivable, Jan. 1, 2010 2,197,500.00

Sales
537,702,500.00
Collections 528,070,500.00
Accounts written off (5,439,500.00)
Accounts receivables, Dec. 31, 2010, 6,390,000.00
Answer: A

Allowance for bad debts, Jan.1 2010

133,500.00
Bad debt expense (537,702,500 x 1 %)
5,377,025.00
Accounts written off
5,439,500.00
Allowance for bad debts, December 31, 2010
71,025.00 Answer: B

PROBLEM 7.

Determining the allowances for bad debts

The following information pertains to ACACIA, INC. for the year ended
December 31, 2010:
Credit sales during 2010 P4,
450,000
Collection of accounts written off in prior periods 170,000
Worthless accounts written off in 2010 191,000
Allowance for doubtful accounts, Jan. 1, 2010 155,000
Acacia, Inc provides for doubtful accounts based on 1 ½ % of credit sales.

7.What is the balance of the allowance for doubtful accounts at December

31, 2010?
A. P345,750

B. P66,750

C. P200,750

D. P242,750

SOLUTION:

Allowance for Doubtful Accounts

Accounts written off P 155,000 Balance, Jan 1, 2010
In 2010
P191,000 66,750 Bad debt expense
For 2010
(4,450,000 x 1 ½ %)
170,000 Recovery of accounts
Written off
P 200,750 Balance,
12/31/2010

PROBLEM 8.

Computing the net realizable value of accounts receivable.

MAHOGANY COMPAY’S analysis and aging of its account receivable at
December 31, 2010 disclosed the following:
Accounts receivable P 460,000
Accounts estimated to be uncollectible (per aging) 95,000
Allowance for bad debts (per books) 103,000
8.What is the net realizable value of mahogany’s receivable at December
31, 2010?
A. P357,000 C. P460,000

B. P262,000 D. P365,000

SOLUTION8:

Accounts receivable P 460,000

Less: accounts estimated to be uncollectible 95,000
Net realizable value 365,000

PROBLEM 9.
The allowance for doubtful accounts has a credit balance of P150,000 at
December 31,2009. During 2010, uncollectible accounts of P35,000 had
been written off. The company estimates its bad debt expense to be2% of
net sales. The balance of the allowance account at the end of 2010 was
P437,000.

The company’s Net Sales for 2010 amounted to

A. P 12,600,000 C. P21,850,000

B. P16,000,000 D. P14,350,000

SOLUTION 9.

Allowance for bad debts, Jan. 1, 2010 P150,000

Uncollectible Accounts written off (35,000)
Bad debts expense (SQUEEZE) 322,000
Allowance for bad debts, December 31, 2010 P437,000
Bad Debt expense= 2 % of net Sales
Net sales(P322,000\2%) P16,100,000

PROBLEM 10.

ROSES, INC. offers sales discount to customers who will pay their accounts in
full within 10 days from date of sale. On October 1, it sold goods on account
for P420, 000. Payment of P411, 600 in satisfaction of this account was
received on October 9.

What is the sales discount rate?

A. 2% C. 2.04%

B. 0% D. 0.04%

SOLUTION 10.
Gross Receivables P 420,000
Less: Amount Received 411,600
Sales Discount P 8,400
Divide by gross receivable P420,000
Sales Discount Rate 2%

PROBLEM 11-15

ACCOUNT BALANCE INVOICE

CUSTOMER DATE
AMOUNT DEC. 31, 2010 DATE AMOUNT
Aruy, Inc. P 35,180 12/6/2010 14,000
11/29/201
0 21,180
Naku Co. 20,920 9/27/2010 12,000
8/20/2010 8,920
Syak Corp. 30,600 12/8/2010 20,000
10/25/201
0 10,600
11/17/201
Trip Co. 45,140 0 23,140
10/9/2010 22,000
12/12/201
Uy Co. 31,600 0 19,200
12/2/2010 12,400
Xak Corp. 17,400 9/12/2010 17,400
CALACHUCHI CORP.’S accounts receivable subsidiary ledger shows the
following information:

The estimated bad debt rates below are based on Calachuchi Corp.’s
receivable collection
experience.
Age of Accounts Rate
0-30 days 1%
31-60 days 1.5%
61-90days 3%
91- 120 days 10%
Over 120 days 50%
The allowance for bad of debts account had a debit balance of P5, 500 on
December 31, 2010, before
adjustment.
11. The company’s accounts receivable under “61-90 days” category should
be
A. P32,600
B. P44,230
C. P44,600
D. P42,000

12. The company’s accounts receivable under “91-120 days” category

should be
A. P38,320
B. P 40,000
C. P29,400
D. P12,000

13. The allowance for bad debts to be reported on the state of financial
position at December 31,
2010 is
A. P 9,699
B. P15,199
C. 4,199
D. 5,500

14. What is the net realizable value of accounts at December 31, 2010?
A. P165, 641
B. P171, 141
C. P196,039
D. P186, 340

Solution:
11.A.32,600
12. C.29,400

COMPUTATION OF REQUIRED ALLOWANCE

DECEMBER 31, 2010

0-30 Days P65,600 X 1% = P 656

31-60 Days 44,320 X 1.50% = 665
61-90 Days 32,600 X 3% = 978
 91-120 Days 29,400 X 10% = 2,940
Over 120 Days 8,920 X 50% = 4,460
13. Answer A.
9,699
14. Solution.
Accounts receivable P180, 840
Less: Allowance for bad debts (see no. 2) ( 9,699)
Net realizable value, Dec. 31, 2010 P171,141
Answer: B

Problem 15.
Esmeralda Company issued fully paid shares to 200 employees on December
31, 2016. Normally, shares are issued to employees’ vest over a two-year
period but these shares have been given as a bonus to the employees
because of their exceptional performance during the year. The shares have a
market value of 500,000 on December 31, 2016, and an average fair value of
600,00 for the year. What amount should be expended for this share-based
payment transaction?

a. 600,000 b. 500,000

c. 300,000 d. 250,00

SOLUTION: Fair Value of share options, December 31, 2016, 500,000

PROBLEM 16-17

Roxanne Company has granted share options to the employees. The total
compensation
expense to the vesting date of December 31, 2019, has been calculated at
8,000,000.
The entity has decided to settle the award early on December 31, 2018.
The compensation expense charged since the date of grant on January 1,
2016, was

2,000,000 for 2016 and 2,100,000 for 2017.

The compensation expense that would have been charged in 2018 was
2,200,000.
PROBLEM 16: What is the compensation expense for 2018?
a. 2,200,000 b. 8,000,000
c. 3,900,000 d, 2,000,000

SOLUTION:
Total compensation 8,000,000
Compensation for 2016 (2,000,000)
Compensation in 2017 (2,100,000)
COMPENSATION IN 2018 3,900,000

PROBLEM 17: What is the compensation expense for 2018 if the share
options are
not exercised but instead the entity paid 7,500,000 to the employees.
a. 2,200,000 c. 3,400,000
b. 3,900,000 d. 7,500,000
SOLUTION:
Cash payment 7,500,000
Compensation in 2016 (2,000,000)
Compensation in 2017 (2,100,000)
COMPENSATION IN 2018 3,400,000

PROBLEM 18:
Wolf Company granted 30,000 share appreciation rights which entitled key
employees
to receive cash equal to the difference between 20 and the market price of
the share
on the date each right is exercised. The service period is 2016 through 2018,
and the rights
are exercising in 2019. The market price of the share was 25 and 28 on
December 31,
2016 and 2017, respectively. What amount should be reported as liability
under the share appreciation rights on December 31, 2017?
a. 0 b. 130,000

c. 160,000 d. 240,000

SOLUTION:

Fair value of share appreciation rights (28-20) 8

Accrued compensation 12/31/16 (30,000 x 8 = 240,000/3 x 2) 160,000
PROBLEM 19-20:

Sarah Company has granted share options to the employees. The total
compensation
expense to the vesting date of December 31, 2019, has been calculated at
5,000,000.
The entity has decided to settle the award early on December 3, 2018.
The compensation expense charge since the date of grant on January 1,
2016, was
1,000,000 for 2016 and 1,200,000 for 2017.
The compensation expense that would have been charged in 2018 was
1,800,000.

PROBLEM 19: What is the compensation expense for 2018?

a. 2,400,000 c. 2,600,000

b. 2,800,000 d. 2,500,000

SOLUTION:

Total compensation 5,000,000

Compensation in 2016 (1,000,000)
Compensation in 2017 (1,200,000)
Compensation in 2018 2,800,000

PROBLEM 20: What is the compensation expense for 2018 if the share
options are
not exercised but instead the entity paid 4,500,000 to the employees.
a. 2,000,000 c. 2,500,000

b. 2,900,000 d. 2,300,000

SOLUTION:

Cash payment 4,500,000

Compensation in 2016 (1,000,000)
Compensation in 2017 (1,200,000)
Compensation in 2018 2,300,000