TRADE AND OTHER RECEIVABLES
Only if the balance sheet method of estimating uncollectible accounts
THEORY
1. Accounts receivable shall be recognized initially at
a. Face value c. Maturity value
b. Discounted value d. Current value
2. Subsequent to initial recognition, accounts receivable should be carried
at
a. Face value c. Maturity value
b. Net realizable value d. Present value
3. Assuming that the ideal measure of short- term receivable in the
balance sheet is the discounted value of the cash to be received in the
future, failure to follow this practice usually does not make the balance
sheet misleading because
a. Most short- term receivables are not interest- bearing
b. The allowance for uncollectible accounts includes a discount element
c. The amount of the discount is not material
d. Most receivables can be sold to a bank or factor
4. Receivables denominated in a foreign currency should be
a. Translated to local currency using the exchange rate at the time the
receivable arise
b. Shown at face value of the foreign currency
c. Translated to local currency using the exchange rate at the balance
sheet date
d. Translated to local currency using the exchange rate when the balance
sheet is issued
5. In reporting accounts receivable at the balance sheet
a. An aging schedule is used to determine which accounts should be
written off prior to preparing the balance sheet totals
b. The allowance for uncollectible accounts, freight charges, sales
discounts, and sales returns and allowances are deducted from accounts
receivable
c. The direct write off method is used to determine the appropriate
balance in the allowance for uncollectible accounts at year-end
d. Only those accounts likely to be collected before the beginning of the
next period should be included in the accounts receivable
6. When individual customer’s accounts have credit balances of material
amounts, these amounts
a. Should be omitted from the balance sheet
b. Must be reported separately in the liability section of the balance sheet
c. May be shown as “credit balances of customers accounts” in the
current assets section
d. May be deducted from the debit balance in other customers accounts in
the asset section
7. Bad debt expense represents
a. that portion of this period’s sales on account not likely to be collected
b. that portion of the balance in accounts receivable at the end of the
period not likely to be collected
c. the amount of accounts receivable written off as uncollectible during
the current period
d. the total of those accounts receivable written off during the period and
the amount judged to be uncollectible at the beginning of the period
8. Which of the following statement is true in relation to presentation of
receivables in statement of financial position?
a. Trade receivables and nontrade receivables are shown separately
b. Nontrade receivables are presented as noncurrent assets
c. Trade account receivables and trade notes receivable shall be presented
separately
d. Trade receivable and nontrade receivable which are currently
collectible shall be presented as one line item called “trade and other
receivables”
9. 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.
is used
d. 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
10. Accounts receivable are classified as current assets
a. Only if convertible into cash beyond one year
b. Only if convertible into cash within 60 days or sooner
c. Only if the allowance method is used to estimate the uncollectible
accounts
d. Whenever accounts receivable arise from “normal” sales to customers,
regardless of the
credit terms
11. If a company employs the gross method of recording receivables from
customers, then sales discounts taken should be reported as
a. A deduction from sales in the income statement
b. An item of other expense in the income statement
c. Sales discounts forfeited in the cost of sales section of the income
statement
d. A deduction from accounts receivable in determining the net realizable
value
12. Which of the following is an advantage of using the net price method
for recording cash discounts on credit sales?
a. It properly reflects current periods sales revenue
b. It simplifies recording of sales returns and allowances
c. It eases communication with customers about their balances
d. It requires less record-keeping efforts than the gross method
13. Which of the following concepts relates to the allowance method in
accounting for accounts receivable?
a. Bad debt expense is based on the actual amount determined to be
uncollectible
b. Bad debt expense is an estimate that is based only on an aging of
accounts receivable
c. Bad debts expense is an estimate that is based on historical and
prospective information
d. Bad debt expense is management determination of which accounts will
be sent to the attorney for collection
14. Which of the following is a generally accepted method of determining
the amount of the adjustment to bad debt expense?
a. A percentage of sales adjusted for the balance in the allowance
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
d. An amount derived from aging accounts receivable and not adjusted for
the balance in the allowance
15. Which is a generally accepted method of determining the amount of
the adjustment to bad debt expense?
a. A percentage of sales adjusted for the balance in the allowance
b. A percentage of accounts receivable not adjusted for the balance in the
allowance
c. An amount derived from aging accounts receivable adjusted for the
balance in the allowance
d. An amount derived from aging accounts receivable not adjusted for the
balance in the allowance
16. Which method does not properly match expense and revenue?
a. Charging bad debts as accounts are written off as uncollectible
b. Charging bad debts with a percentage of sales under the allowance
method
c. Charging bad debts using aging of accounts receivable under the
allowance method
d. Charging bad debts using a percentage of accounts receivable under the
allowance method
17. A method of estimating bad debts that focuses on the income
statement whether rather than the statement of financial position is the
allowance method based on
a. Direct write-off method
b. Aging the trade accounts receivable What amount should it report for account receivable, before allowances
c. Credit sales for sales returns and
d. The balance in the trade accounts receivable uncollectible accounts as of December 31, 2021?
a. P1,200,000 c. P1,085,000
18. When an accounts receivable aging schedule is prepared, a series of b. P1,125,000 d. P925,000
computations is made to determine estimated uncollectible accounts. The
resulting amount from this aging schedule 3. When examining the accounts of Lorelie Company, you ascertain that
a. When added to the total accounts written off during the year is the balances relating to both receivables and payables are included in a single
desired credit balance of the allowance for doubtful accounts at year-end controlling account called receivables control that has a debit balance of
b. Is the amount of doubtful accounts expense for the year P4,850,000. An analysis of the make-up of this account revealed the
c. Is the amount that should be added to the beginning allowance for following:
doubtful accounts to get the doubtful accounts expense for the year
d. Is the amount of desired credit balance of the allowance for doubtful Debit Credit
accounts to be reported at year end Accounts receivable – customers P7,800,000
Accounts receivable – officers 500,000
Debit balances – creditors 300,000
19. From the standpoint of accounting theory, the allowance method of Postdated checks from customers 400,000
accounting for uncollectible accounts expense is much better than the Subscriptions receivable 800,000
direct write off method because Accounts payable for merchandise P4,500,000
a. Uncollectible accounts are merely charged to expense in the period Credit balances in customers’ accounts 200,000
when such receivables are determined to be collectible Cash received in advance from customers
b. Expenses are unmatched with related revenues for goods not yet shipped 100,000
c. The receivables are not stated at their provable realizable value Expected bad debts 150,000
d. Uncollectible accounts are recorded as expenses in the period in which
the individual accounts are determined to be worthless After further analysis of the aged accounts receivable, you determined
that the allowance for doubtful accounts should be P200,000. What is the
20. When the allowance method is used, the entry which is appropriate correct total of current net receivables?
when a particular account is written off as uncollectible should include a a. P8,950,000 c. P8,600,000
a. Credit to sales revenue c. Debit to accounts receivable b. P8,800,000 d. P8,850,000
b. Credit to bad debt expense d. Debit to allowance for doubtful accounts
4. Harrah Corporation showed the following balances on January 1, 2021:
21. A company, which has an adequate amount in its Allowance for Accounts receivables P600,000
Doubtful Accounts, writes off as uncollectible an accounts receivable Allowance for doubtful accounts 30,000
from a bankrupt customer. This action will
a. Have no effect on total current assets The following transactions affecting accounts receivable occurred during
b. Reduce net income for the period the year ended December 31, 2021:
c. Reduce the amount of equity
d. Reduce total current assets

22. When a specific customer’s account receivable is written off as

uncollectible, what will be the effect on net income under each of the
following methods of recognizing bad debt expense?
Allowance Direct write-off
a. None Decrease
b. Decrease None
c. Decrease Decrease
d. None None The company uses the percentage of accounts receivable method in
determining the allowance for doubtful accounts. What is the net
PROBLEMS realizable value of accounts receivable on December 31, 2021?
1. Judy Company reported current receivables on December 31, 2021 a. P855,000 c. P850,000
which consisted of the following: b. P900,000 d. P895,000

5. Mary Company began operations on January 1, 2021. On December

31, 2021, it provided for uncollectible accounts based on 1% of annual
credit sales. On January 1, 2022, it changed its method of determining its
allowance for uncollectible accounts by applying certain percentages to
the accounts receivable aging as follows:
What is the correct total of current net receivables on December 31,
2021?
a. P1,500,000 c. P1,240,000
b. P1,200,000 d. P940,000

2. The following information relates to Kay Co.’s accounts receivable for

2021:
Accounts receivable, 1/1/21 P650,000 In addition, it wrote off all accounts receivables that were over 1 year old.
Credit sales for 2021 2,700,000 The following additional information relates to the years ended December
Sales returns for 2021 75,000 31, 2022 and 2021:
Accounts written off during 2021 40,000
Collections from customers during 2021 2,150,000
Estimated future sales returns at 12/31/21 50,000
Estimated uncollectible accounts at 12/31/21 140,000
What is the uncollectible accounts expense for the year ended December
31, 2022?
a. P39,000
b. P31,000
c. P38,000
d. P11,000

6. Gelyn Company began operations on January 1, 2018. From 2018 to

2020, the entity provided for doubtful accounts based on 5% of annual
credit sales. On January 1, 2021, the entity changed the
method of determining the allowance for doubtful accounts using an
aging schedule. In addition, the entity writes off all accounts receivable
that are over 1 year old. The following information relates to the years
ended December 31, 2018, 2019, 2020 and 2021:

Question 1: What was the allowance for doubtful accounts on January 1,

2021?
a. P1,175,000 c. P1,240,000
b. P1,040,000 d. P975,000

Question 2: What amount should be reported as allowance for doubtful

accounts on December 31, 2021?
a. P1,380,000 c. P2,420,000
b. P1,480,000 d. P1,060,000

Question 3: What amount should be reported as doubtful accounts

expense for 2021?
a. P550,000 c. P450,000
b. P750,000 d. P200,000

Question 4: What is the net realizable value of accounts receivable on

December 31, 2021?
a. P6,900,000 c. P5,520,000
b. P7,000,000 d. P5,620,000