PAMANTASAN NG LUNGSOD NG VALENZUELA

Review in Theory of Accounts (Financial Accounting I) ______ 7. Why do companies provide trade discounts?
Hand-out: Accounts Receivable a. To avoid frequent changes in catalogs.
Estimation of Doubtful Accounts b. To induce prompt payment.
c. To easily alter prices for different customers.
NAME: SCORE: SECTION: d. Both A and C.
______ 8. The accounting for cash discount and trade discounts are
THEORIES:
a. The same c. Not the same.
______ 1. The category “trade receivable” includes
b. Always recorded net d. Tied to the timing of cash collections on the delivery
a. Advances to officers and employees.
b. Income tax refunds receivable ______ 9. Of the approaches to record cash discounts related to accounts receivable, which is more
c. Claims against insurance companies for casualties sustained. theoretically correct?
d. None of these. a. Net approach. c. Allowance approach.
b. Gross approach. d. All three approaches are theoretically correct.
______ 2. Which of the following should be recorded in Accounts Receivable?
a. Receivable from officer c. Dividends receivable ______ 10. All of the following are problems associated with the valuation of accounts receivable
b. Receivables from subsidiaries d. None of these. except for
a. Uncollectible accounts c. Cash discounts under net method.
______ 3. What is the preferable presentation of receivable from officers, employees, affiliated
b. Returns d. Allowances granted.
companies on a balance sheet?
a. As offsets to capital ______ 11. Why is the allowance method preferred over direct write-off method of accounting for
b. By means of footnotes only bad debts?
c. As assets but separately from other receivable. a. Allowance method is used for tax purposes.
d. As trade notes and accounts receivable if they otherwise qualify as current assets. b. Estimates are used.
c. Determining worthless accounts under direct write-off method is difficult to do.
______ 4. When a customer purchases merchandise inventory from a business organization, she
d. Improved matching bad debts expense with revenue.
may be given a discount which is designed to induce prompt payment. Such discount is called a(n)
a. Trade discount c. Enhancement discount ______ 12. Which of the following concepts relates to using the allowance method in accounting for
b. Nominal discount d. Cash discount accounts receivable?
a. Bad debts expense is an estimate that is based on historical and prospective information.
______ 5. Trade discounts are
b. Bad debts expense is based on the actual amounts determined to be uncollectible.
a. Not recorded in the accounts; rather they are means of computing price.
c. Bad debt expense is an estimate that is based only on an analysis of the receivables aging.
b. Used to avoid frequent changes in catalogs.
d. Bad debt expense is management’s determination of which accounts will be sent to the attorney
c. Used to quote different prices for different quantities purchased.
for collection.
d. All of the above.
______ 13. How can accounting for bad debts be used for earnings management?
______ 6. If a company employs the gross method of recording accounts receivable from
a. Determining which accounts to write-off.
customers, then sales discounts taken should be reported as
b. Changing the percentage of sales recorded as bad debt expense.
a. A deduction from sales in the income statement.
c. Using an aging of the accounts receivable balance to determine bad debt expense.
b. An item of “other expense” in the income statement.
d. Reversing previous write-offs.
c. A deduction from accounts receivable in determining the net realizable value of accounts
receivable. ______ 14. What is the normal journal entry for recording bad debt expense under the allowance
d. Sales discounts forfeited in the cost of goods sold section of the income statement. method?
TOAREV: Hand-out: Accounts Receivable and Estimation of Doubtful Accounts (2019-2020, 1st Semester) jvacpa
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a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable. ______ 20. Which of the following is a generally accepted method of determining the amount of the
b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. adjustment to bad debt expense?
c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. a. A percentage of sales adjusted for the balance in the allowance.
d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts. b. A percentage of sales not adjusted for the balance in the allowance.
c. A percentage of accounts receivable not adjusted for the balance in the allowance.
______ 15. What is the normal entry when writing-off an account as uncollectible under the
d. An amount derived from aging accounts receivable and not adjusted for the balance in the
allowance method?
allowance.
a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense. ______ 21. The advantage of relating a company’s bad debt expense to its outstanding accounts
c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. receivable is that this approach
d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts. a. Gives a reasonably correct statement of receivables in the balance sheet.
______ 16. Which of the following is included in the normal journal entry to record the collection of b. Best relates bad debt expense to the period of sale.
accounts receivable previously written off when using the allowance method? c. Is the only generally accepted method for valuing accounts receivable.
a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable. d. Makes estimates of uncollectible accounts unnecessary.
b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.
c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts. PROBLEMS:
d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts. 1. ABC Corporation gathered the following items for the year December 31, 2016:
Cash in bank ( including customer's post-dated checks of P20,000 and
______ 17. Assuming that the ideal measure of short-term receivables in the balance sheet is DAUD check of P30,000) P 350,000
discounted value of the cash to be received in the future, failure to follow this practice is usually does Trade accounts receivable, net of credit balances of P50,000 450,000
not make the balance sheet misleading because Trade installment accounts receivable (usually due in 15 months) 300,000
a. Most short-term receivables are not interest bearing. Trade notes receivables (included is a P50,000 discounted to a bank with recourse) 250,000
b. The allowance for uncollectible accounts includes a discount element. Cash advances to sales agents 80,000
c. The amount of the discount is not material. Advances to suppliers 100,000
d. Most receivables can be sold to a bank or factor. Subscriptions receivable 60,000
______ 18. Which of the following methods of determining bad debt expense does not properly Factor's holdback 70,000
match expense and revenue? Receivable from officers (currently collectible) 40,000
a. Charging bad debts with a percentage of sales under allowance method. Advances from customers 120,000
b. Charging bad debts with an amount derived from a percentage of accounts receivable under the Loan to subsidiary (payable in 4 semi-annual installments every February 1 and
allowance method. August 1 starting August 1, 2017) 1,200,000
c. Charging bad debts with an amount derived from aging accounts receivable under allowance Due from company’s Vice-president (due 2018) 200,000
method. Claims receivable 100,000
d. Charging bad debts as accounts are written off as uncollectible. Bonds receivables 900,000
Accrued interest income from trade notes 30,000
______ 19. Which of the following methods of determining annual bad debt expense best achieves Assigned accounts receivable (included in the above trade accounts receivable) 120,000
the matching concept? Accrued dividends receivables 35,000
a. Percentage of sales c. Percentage of ending accounts receivable Lease receivable (under 10-year finance lease) 650,000
b. Percentage of average accounts receivable d. Direct write-off Allowance for doubtful accounts 30,000
Allowance for estimated sales discount 10,000
Allowance for estimated sales return and allowances 25,000

TOAREV: Hand-out: Accounts Receivable and Estimation of Doubtful Accounts (2019-2020, 1st Semester) jvacpa
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 Long-term refundable deposits 75,000 Collections received to settle accounts 2,450,000
Accounts payable, net of debit balances amounted to P40,000 300,000 Notes given to creditors in settlement of accounts 250,000
Notes payable, related to assigned accounts 70,000 Merchandise returned to suppliers 70,000
Payments on notes payable 100,000
What is the total amount to be presented as "Trade and Other Receivables" on the December 31,
Discounts taken by customers 40,000
2016 Statement of Financial Position?
Collections received in settlement of notes 180,000
a. P1,740,000 c. P1,860,000
Notes Receivable dishonored 100,000
b. P1,780,000 d. P2,040,000
What is the net realizable value of accounts receivable on Dec 31,2017?
a. 805,000 c. 825,000
2. Von company provided the following data for 2017 in relation to its accounts receivable: b. 890,000 d. 670,000
DEBIT CREDIT
Beginning balance after deducting Collections from customers, including
credit balance of 30,000 530,000 overpayment of 50,000 5,200,000 4. The Financial Statements of Katherine company included the following information:
Charge sales 5,250,000 Write-off 35,000 01.01.2017 12.31.2017
Charge for goods out on Merchandise returns 25,000
Accounts receivable 1,200,000
consignment 50,000 Allowances to customers for
Shareholders’ subscriptions 200,000 shipping damages 15,000 Allowance for doubtful accounts 600,000
Accts. Written off but recovered 10,000 Collection on carrier claim 10,000 Sales 8,000,000
Cash paid to customer for Jan.1 Collection on subscription 50,000 Cash collected from customers 7,000,000
credit balance 5,000
Goods shipped to cover Jan.1 The cash collections included a recovery of P10,000 from a customer whose account had been
credit balance 25,000 written off as worthless in 2016. During 2017, it was necessary to recognize doubtful accounts
Deposit on contract 120,000 expense of 100,000 and write off worthless customers’ accounts of P30,000. On Dec 1, 2017, a
Claim against common carrier 15,000 customer settled an account by issuing a 12%, six-month note for P400,000.
Advances to supplier 155,000
What is the net realizable value of accounts receivable on Dec 31, 2017?
What is the balance of accounts receivable to be presented on the statement of financial position a. 1,640,000 c. 1,780,000
on Dec 31,2017? b. 1,670,000 d. 1,630,000
a. 565,000 c. 545,000
b. 595,000 d. 495,000
5. Robert Company began operations on December 1, 2016 as a distributor of cellphone and tablet
accessories. On December 18, 2016, Robert sold merchandise costing P200,000 for P300,000
3. The following data were taken from the records of Infra company for the year ended Dec 31,2017: under the following terms: 2/10, n/30, FOB Destination and Freight Collect. Freight amounted to
Sales on accounts 3,600,000 P10,000. The merchandise was received by the buyer on December 26, 2016. On December 28,
Notes received to settle accounts 300,000 2016, the buyer paid the total amount due. What is the total amount received by Robert on
Provision for doubtful accounts 90,000 December 28, 2016?
Accounts receivable determined to be worthless 25,000 a. 284,000 c. 290,000
Purchases on accounts 3,900,000 b. 300,000 d. 284,200
Payments to creditors 3,200,000
Discounts allowed by creditors 260,000
Merchandise returned by customer 15,000
TOAREV: Hand-out: Accounts Receivable and Estimation of Doubtful Accounts (2019-2020, 1st Semester) jvacpa
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6. On October 1, Kagome Inc. sold on account goods with a list price of P100,000 under the
following terms: Trade discounts of 20% and 10%; cash discounts of 2/10, n/30; FOB Shipping During 2017, credit sales totaled P9,000,000, interim provisions for doubtful accounts were made
Point and Freight Prepaid. Freight amounted to P4,000. Kagome's policy is to record accounts at 2% of credit sales, P90,000 of bad debts were written off, and recoveries of accounts previously
receivable and sales at net amount of cash discount. On October 12, the buyer paid the total written off amounted to P15,000. Murr prepared an aging of accounts receivable for the first time
amount due. What is the total amount received by Kagome on October 12? on Dec 31, 2017.
a. 72,000 c. 74,560
b. 74,480 d. 76,000 A summary of the aging is as follows:
Classification Balance Uncollectible
7. From inception of operations in 2013, Axis Company carried no allowance for doubtful accounts. Nov-Dec 2,000,000 2%
Uncollectible receivables were expenses as written off and recoveries were credited to income as July- Oct 600,000 10%
collected. Jan- June 400,000 25%
Prior to Jan 1,2017 200,000 75%
On March 1,2017 (after the 2016 FS were issued), management recognized that Axis’ accounting
3,200,000
policy with respect to doubtful accounts was not correct, and determined that an allowance for
doubtful accounts was necessary. Based on the review of collectability of the account balance in the prior to Jan 1, 2017 aging
A policy was established to maintain an allowance for doubtful accounts based on historical bad category, addt’l receivables totaling P60,000 were written off on Dec 31, 2017.
debt loss percentage applied to year-end accounts receivable.
Effective with the year ended Dec 31, 2017, Murr adopted a new accounting method for
The historical bad debt loss percentage is to be recomputed each year based on all available past estimating the allowance for doubtful accounts at the amount indicated by the year-end aging
years up to a maximum of five years. Info for five years is as follows: analysis of accounts receivable.
Year Credit Sales Write-offs Recoveries
What is the year-end adjustments to the allowance for doubtful accounts on Dec 31, 2017?
2013 1,500,000 15,000 0
a. 305,000 c. 320,000
2014 2,250,000 38,000 2,700
b. 180,000 d. 140,000
2015 2,950,000 52,000 2,500
2016 3,300,000 65,000 4,800
2017 4,000,000 83,000 5,000
9. Easy company sells directly to retail customers. On Jan 1,2017, the balance of the accounts
Accounts receivable balance were P1,250,000 and P2,000,000 on Dec 31,2016 and 2017, receivable was P2,070,000 while the allowance for doubtful accounts was a credit of P78,000. The
respectively. following data are gathered:
Credit Sales Write-offs Recoveries
What amount should Axis company report as doubtful accounts expense for 2017?
2014 11,100,000 260,000 22,000
a. 97,000 c. 83,000
2015 12,250,000 295,000 37,000
b. 78,000 d. 92,000
2016 14,650,000 300,000 36,000
2017 15,000,000 310,000 42,000
8. From the inception of operations to Dec 31,2017, Murr company provided for uncollectible Doubtful accounts are provided for as a percentage of credit sales. The accountant calculates the
accounts expense under the allowance method, provisions were made monthly at 2% of credit percentage annually by using the experience of the three years prior to the current year.
sales, bad debts written off were charged to the allowance account, recoveries of bad debts
What amount should be reported as allowances for doubtful accounts on Dec 31,2017?
previously written off were credited to the allowance account, and no year-end adjustments to the
a. 110,000 c. 300,000
allowance account were made. Murr’s usual credit terms are net 30 days.
b. 378,000 d. 478,000
The balance in the allowance for doubtful accounts was P120,000 on Jan 1, 2017.

TOAREV: Hand-out: Accounts Receivable and Estimation of Doubtful Accounts (2019-2020, 1st Semester) jvacpa
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10. When examining the accounts of Brute Company, it is ascertained that balance relating to both
receivables and payables are included in a single controlling accounts called receivables control
that has a debit balance of P4,850,000. An analysis of the make-up of this acct revealed the
following:
Debit Credit
Accounts receivable-customers 7,800,000
Accounts receivable- officers 500,000
Debit balance - creditors 300,000
Postdated checks from customers 400,000
Subscriptions receivable 800,000
Accounts payable for merchandise 4,500,000
Credit balances in customers’ accounts 200,000
Cash received in advance from customers for good not
yet shipped 100,000
Expected bad debts 150,000
After further analysis of the aged accounts receivable, it is determined that the allowance for
doubtful accounts should be P200,000.
What amount should be reported as trade and other receivables under current assets?
a. 8,950,000 c. 8,600,000
b. 8,800,000 d. 8,850,000

TOAREV: Hand-out: Accounts Receivable and Estimation of Doubtful Accounts (2019-2020, 1st Semester) jvacpa
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