Chapter 4

Accounts Receivable

1. Which of the following should be recorded in Accounts Receivable?

a. Receivables from officers representing employee loans
b. Receivables from subsidiaries
c. Dividends receivable
d. None of these

2. When the allowance method of recognizing bad debts expense is used, the entry to record the write-
off of a specific uncollectible account would decrease
a. the allowance for doubtful accounts.
b. the profit for the period.
c. the net realizable value of accounts receivable.
d. the working capital.

3. Information from the records of Stormfall Co. is shown below:

● Accounts receivable - net of ₱8,000 credit balance in
customers' accounts 100,000
● Notes receivable (trade) 15,000
● Notes receivable (non-trade), ₱15,000 collectible
within one year 30,000
● Dividends receivable 2,000
● Subscriptions receivable 2,000
● Advances to officers and employees (due in 10
months) 4,000
● Accounts payable - net of ₱10,000 debit balance in
suppliers' accounts 3,000

How much are the following?

Total trade receivables Total current receivables
a. 132,000 154,000
b. 123,000 154,000
c. 143,000 162,000
d. 123,000 145,000

4. On December 27, 20x1, ABC Co. received a sale order for a credit sale of goods with selling price of
₱3,000. The goods were shipped by ABC on December 31, 20x1 and were received by the buyer on
January 2, 20x2. The related shipping costs amounted to ₱20. ABC Co. collected the receivable on
January 5, 20x2. If the term of the sale is FOB destination, freight collect , how much net cash is
collected on January 5, 20x2?
a. 3,020
b. 3,000
c. 2,980
d. 0

5. Soap Co. has the following information on December 31, 20x1 before any year-end adjustments.

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 Allowance for doubtful accounts, Jan. 1 30,400
Write-offs 19,000
Recoveries 3,800
Sales (including cash sales of ₱380,000) 2,280,000
Sales returns and discounts (including ₱3,800 sales
22,800
returns on cash sales)
Accounts receivable, Dec. 31 570,000
Percentage of credit sales 3%

How much is the recoverable historical cost of accounts receivable?

a. 498,370
b. 502,630
c. 486,780
d. 478,970

6. Washing Co. has the following information on December 31, 20x1 before any year-end adjustments.
Accounts receivable, Jan. 1 80,000
Net credit sales 270,000
Collections from customers (including recoveries) 140,000
Allowance for doubtful accounts, Jan. 1 10,000
Write-offs 5,000
Recoveries 1,000
Percentage of receivables 5%

How much is the bad debt expense?

a. 4,250
b. 4,300
c. 4,550
d. 10,300

7. Fabric Co. sells to wholesalers on terms of 2/15, net 30. An analysis of Fabric Co.’s trade receivable
balances on December 31, 20x1, revealed the following:
Age in days Receivable balances
0 – 15 180,000
16 – 30 108,000
31 – 60 90,000
61 – 90 72,000
91 – 120 54,000
121 – 150 36,000
Total accounts receivables 540,000

Fabric Co. uses the aging of receivables method. The estimated percentages of collectability based on
past experience are shown below:
Accounts that are overdue for less than 31 days 97%
Accounts that are overdue 31 – 60 days 90%
Accounts that are overdue 61 – 90 days 85%
Accounts that are overdue 91 – 120 days 65%

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 Accounts that are overdue for over 120 days 40%
The allowance for doubtful accounts has a balance of ₱18,000 as of January 1, 20x1. Write-offs and
recoveries during the year amounted to ₱6,000 and ₱3,000, respectively.

How much is the doubtful accounts expense for the year?

a. 15,600
b. 9,000
c. 22,600
d. 28,200

Use the following information for the next two questions:

ABC Co. has the following information on December 31, 20x1 before any year-end adjustments.
Net credit sales 6,300,000
Accounts receivable, December 976,500
Allowance for doubtful accounts, Dec. 31 (before any
53,550
necessary year-end adjustments)
Percentage of credit sales 2%

The aging of receivables is shown below:

Days outstanding Receivable balances % uncollectible
0 – 60 378,000 1%
61 – 120 283,500 2%
Over 120 315,000 6%
Total accounts receivables 976,500

Additional information:
● ABC Co. uses the percentage of credit sales in determining bad debts in monthly financial reports
and the aging of receivables for its annual financial statements.
● Accounts written-off during the year amounted to ₱119,700 and accounts recovered amounted to
₱28,350.
● As of December 31, ABC Co. determined that ₱63,000 accounts receivable from a certain customer
included in the “61-120 days outstanding” group is 95% collectible and a ₱31,500 account included in
the “Over 120 days outstanding” group is worthless and needs to be written-off.

8. How much is the balance of the allowance for doubtful accounts on January 1, 20x1?
a. 12,600
b. 18,900
c. 19,200
d. 23,400

9. How much is the adjusted bad debt expense to be reported in the year-end financial statements?
a. 123,300
b. 128,700
c. 143,300
d. 132,300

10. ABC Co. has the following information before any year-end adjustment.
Accounts receivable, Dec. 31 600,000

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 Allowance for doubtful accounts, Jan. 1 18,000 (Dr.)
Percentage of receivables 2%

Write-offs and recoveries during the year amounted to ₱22,800 and ₱3,000, respectively. How
much is the bad debts expense for the year?
a. 13,800
b. 26,800
c. 49,800
d. 52,800

“The heart of the discerning acquires knowledge, for the ears of the wise seek it out.” (Proverbs 18:15)
- END –

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