Republic of the Philippines

Laguna State Polytechnic University

Province of Laguna
ISO 9001:2015 Certified
Level I Institutionally Accredited

Performance Tasks

Directions: Encircle the letter of the correct answer.

MULTIPLE-CHOICE
1. All of the following are problems associated with the measurement of accounts receivable, except
A. Returns
B. Allowances granted
C. Uncollectible accounts
D. Cash discounts under the net method

2. Accounts receivable shall be recognized initially at

A. Current value C. Face value
B. Discounted value D. Maturity value

3. Nontrade receivables are classified as current assets only if they are reasonably expected to be realized in
cash
A. Within the normal operating cycle.
B. Within one year, the length of the operating cycle notwithstanding
C. Within one year or within the operating cycle, whichever is longer.
D. Within one year or within the operating cycle, whichever is shorter.

4. Which of the following statements is true in relation to presentation of receivables in the statement of
financial position?
A. Nontrade receivables are presented as noncurrent assets
B. Trade receivables and nontrade receivables are shown separately
C. Trade accounts receivable and trade notes receivable shall be presented separately
D. Trade receivables and nontrade receivables which are currently collectible shall be presented as one line
item called "trade and other receivables"

5. Which of the following is not acceptable in estimating uncollectible accounts receivable?

A. The estimate of uncollectible accounts is based on an aging schedule.
B. The estimate of uncollectible accounts is based on a percentage of sales for the period.
C. The estimate of uncollectible accounts is based on a percentage of the accounts receivable at the end of a
period.
D. No estimate of uncollectible accounts is made but accounts are written off when it is determined they
cannot be collected.

6. When the direct writeoff method of recognizing bad debt expense is used, the entry to write off a specific
customer account would
A. Increase net income
B. Have no effect on net income
C. Increase accounts receivable and increase net income

LSPU SELF-PACED LEARNING MODULE: INTERMEDIATE ACCOUNTING 1

 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna
ISO 9001:2015 Certified
Level I Institutionally Accredited
D. Decrease accounts receivable and decrease net income
7. An entity uses the allowance method for recognizing doubtful accounts. The journal entry to record the
writeoff of a specific uncollectible account
A. Affects neither net income nor working capital
B. Decreases both net income and working capital
C. Affects neither net income nor accounts receivable
D. Decreases both net income and accounts receivable

8. When the allowance method of recognizing doubtful accounts is used, the entry to record the writeoff of a
specific account would
A. Increase both accounts receivable and the allowance for doubtful accounts
B. Decrease both accounts receivable and the allowance for doubtful accounts
C. Decrease accounts receivable and increase allowance for doubtful accounts
D. Increase accounts receivable and decrease the allowance for doubtful accounts

9. When the allowance method of recognizing bad debt expense is used, the entry to record the writeoff of a
specific uncollectible account would decrease
A. Net income
B. Working capital
C. Allowance for doubtful accounts
D. Net realizable value of accounts receivable

10. When the allowance method of recognizing uncollectible accounts is used, the entry to record the writeoff of
a specific account would
A. Decrease both accounts receivable and net income.
B. Increase the allowance for uncollectible accounts and decrease net income.
C. Decrease both accounts receivable and the allowance for Uncollectible accounts.
D. Decrease accounts receivable and increase the allowance for uncollectible accounts.

11. Roxy Company provided the following information relating to accounts receivable for 2014:

Accounts receivable on 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 of receivables
at December 31 165,000

On December 31,2014, what is the balance of accounts receivable, before allowance for doubtful accounts?
A. 1,825,000 C. 1,950,000
B. 1,850,000 D. 1,990,000

LSPU SELF-PACED LEARNING MODULE: INTERMEDIATE ACCOUNTING 1

 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna
ISO 9001:2015 Certified
Level I Institutionally Accredited

12. Faith Company provided the following information relating to current operations:

Accounts receivable, January 1 4,000,000

Accounts receivable collected 8,400,000
Cash sales 2,000,000
Inventory, January 1 4,800,000
Inventory, December 31 4,400,000
Purchases 8,000,000
Gross margin on sales 4,200,000

What is the balance of accounts receivable on December 31 ?

A. 2,000,000 C. 6,200,000
B. 4,200,000 D. 8,200,000

13. Katherine Company provided the following information for 2014:

January 1 December-31
Accounts receivable 1,200,000
Allowance for doubtful accounts 60,000
Sales 8,000,000
Cash collected from customers 7,000,000

The cash collections included a recovery of P10,000 from a customer whose account had been written off as
worthless in prior year. During 2014, it was necessary to recognize doubtful accounts expense of P100,000
and write off worthless customers' accounts of P30,000. On December 1, 2014, a customer settled an account
by issuing a 12%, six-month note for P400,000. What is the net realizable value of accounts receivable on
December 31, 2014?
A. 1,630,000 C. 1,670,000
B. 1,640,000 D. 1,780,000

14. Roanne Company used the allowance method of accounting for uncollectible accounts. During 2014, the
entity had charged P800,000 to bad debt expense, and wrote off accounts receivable of P900,000 as
uncollectible. What was the decrease in working capital?
A. 0 C. 800,000
B. 100,000 D. 900,000

15. Mill Company's allowance for doubtful accounts was P1,000,000 at the end of 2014 and P900,000 at the end
of 2013. For the year ended December 31,2014, the entity reported doubtful accounts expense of P160,000
in the income statement. What amount was debited to the appropriate account to write off uncollectible
accounts in2014?
A. 60,000 C. 160,000
B. 100,000 D. 260,000

LSPU SELF-PACED LEARNING MODULE: INTERMEDIATE ACCOUNTING 1

 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna
ISO 9001:2015 Certified
Level I Institutionally Accredited

16. Ladd Company provided the following data for the current year:

Allowance for doubtful accounts - January 1 180,000

Sales 9,500,000
Sales returns and allowances 800,000
Sales discounts 200,000
Accounts written off as uncollectible 200,000

The entity provided for doubtful accounts expense at the rate of 3% of net sales. What is the allowance for
doubtful accounts at year-end?
A. 235,000 C. 265,000
B. 241,000 D. 435,000

17. Capetown Company began operations on January 1, 2013. The entity has found that the estimated bad debt
expense has been consistently higher than actual bad debts. Management proposed lowering the percentage
from 3% of credit sales to 2%. Credit sales for 2014 totaled P5,000,000, and accounts written off as
uncollectible during 2014 totaled P550,000. What is the bad debt expense for 2014?
A. 100,000 C. 240,000
B. 150,000 D. 550,000

18. Effective with the year ended December 31, 2014, Hall Company adopted a new accounting method for
estimating the allowance for doubtful accounts at the amount indicated by the year-end aging of accounts
receivable. The following data are available:

Allowance for doubtful accounts, January 1 250,000

Provision for doubtful accounts during the current year
(2% of credit sales of P10,000,000) 200,000
Accounts written off 205,000
Estimated uncollectible accounts per aging on December 31 220,000

After year-end adjustment, what is the doubtful accounts expense for current year?
A. 175,000 C. 205,000
B. 200,000 D. 220,000

19. Marian Company used the allowance method of accounting for bad debts. The following summary schedule
was prepared from an aging of accounts receivable outstanding on December 31 of the current year:

Number of days Probability

outstanding Amount of collection
0-30 days 5,000,000 .98
31 -60 days 2,000,000 .90
Over 60 days 1,000,000 .80

The following additional information is available for the current year:

Net credit sales for the year 40,000,000
Allowance for doubtful accounts:
Balance, January 1 450,000 (cr)

LSPU SELF-PACED LEARNING MODULE: INTERMEDIATE ACCOUNTING 1

 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna
ISO 9001:2015 Certified
Level I Institutionally Accredited
Balance before adjustment, December 31 20,000 (dr)

The entity based the estimate of doubtful accounts on the aging of accounts receivable. What amount should
be recognized as doubtful accounts expense for the current year?
A. 470,000 C. 500,000
B. 480,000 D. 520,000

20. Seiko Company reported the following balances after adjustment at year-end:

2014 2013
Accounts receivable 5,250,000 4,800,000
Net realizable value 5,100,000 4,725,000

During 2014, the entity wrote off accounts totaling P160,000 and collected P40,000 on accounts written off
in previous year. What amount should be recognized as doubtful accounts expense for the year ended
December 31,2014?
A. 120,000 C. 160,000
B. 150,000 D. 195,000

LSPU SELF-PACED LEARNING MODULE: INTERMEDIATE ACCOUNTING 1

 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna
ISO 9001:2015 Certified
Level I Institutionally Accredited
ANSWERS

1. D

2. C

3. B

4. D

5. D

6. D

7. A

8. B

9. C

10. C

11. Answer is (A).

Accounts receivable - January 1 1,300,000
Add: Credit sales 5,400,000
Total 6,700,000
Less: Collection from customers 4,750,000
Accounts written off 125,000 4,875,000
Accounts receivable - December 31 1,825,000
The recovery of accounts written off does not affect the balance of accounts receivable because the effect is
offsetting.

12. Answer is (C).

Inventory - January 1 4,800,000
Purchases 8,000,000
Goods available for sale 12,800,000
Inventory - December 31 (4,400,000)
Cost of goods sold 8,400,000
Gross margin on sales 4,200,000
Gross sales 12,600,000
Cash sales ( 2,000,000)
Credit sales 10,600,000'
Accounts receivable – January 1 4,000,000
Total 14,600,000
Accounts receivable collected ( 8,400,000)
Accounts receivable – December 31 6,200,000

13. Answer is (B).

Accounts receivable - January 1 1,200,000

LSPU SELF-PACED LEARNING MODULE: INTERMEDIATE ACCOUNTING 1

 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna
ISO 9001:2015 Certified
Level I Institutionally Accredited

Sales 8,000,000
Total 9,200,000
Cash collections (7,000,000 - 10,000) (6,990,000)
Writeoff ( 30,000)
Note received in settlement of account ( 400,000)
Accounts receivable - December 31 1,780,000
Allowance for doubtful accounts – January 1 60,000
Recovery of accounts written off 10,000
Doubtful accounts expense 100,000
Total 170,000
Writeoff ( 30,000)
Allowance for doubtful accounts - December 31 140,000
Net realizable value (1,780,000- 140,000) 1,640,000

14. Answer is (C). Only the bad debt expense decreases working capital. The writeoff does not affect anymore the
working capital because the effect is offsetting.

15. Answer is (A).

Allowance for doubtful accounts -12/31/2013 900,000
Doubtful accounts expense 160,000
Total 1,060,000
Accounts written off (SQUEEZE) (60,000)
Allowance for doubtful accounts - 12/31/2014 1,000,000

16. Answer is (A).

Allowance for doubtful accounts - January 1 180,000
Doubtful accounts expense (9,500,000-800,000-200,000 x 3%) 255,000
Total 435,000
Accounts written off (200,000)
Allowance for doubtful accounts - December 31 235,000
Under the percentage of sales method, the amount computed represents the doubtful accounts expense.

17. Answer is (A). Bad debt expense for 2014 (2% x 5,000,000) 100,000

18. Answer is (A).

Allowance for doubtful accounts - January 1 250,000
Doubtful accounts expense (SQUEEZE) 175,000
Total 425,000
Accounts written off (205,000)
Allowance for doubtful accounts - December 31 220,000

Correct doubtful accounts expense 175,000

Recorded doubtful accounts expense 200,000
Overstatement of doubtful accounts expense ( 25,000)

Adjusting journal entry

Allowance for doubtful accounts 25,000
Doubtful accounts expense 25,000

19. Answer is (D).

LSPU SELF-PACED LEARNING MODULE: INTERMEDIATE ACCOUNTING 1
 Republic of the Philippines
Laguna State Polytechnic University
Province of Laguna
ISO 9001:2015 Certified
Level I Institutionally Accredited

0-30 days (5,000,000 x 2%) 100,000

31 - 60 days (2,000,000 x 10%) 200,000
Over 60 days (1,000,000 x 20%) 200,000
Required allowance - December 31 500,000
Add: Debit balance in allowance 20,000
Doubtful accounts expense 520,000

20. Answer is (D).

Allowance- 12/31/2013 (4,800,000-4,725,000) 75,000
Recovery of accounts written off in previous year 40,000
Doubtful accounts expense for 2014 (SQUEEZE) 195,000
Total 310,000
Accounts written off in 2014 (160,000)
Allowance-12/31/2014 (5,250,000-5,100,000) 150,000

LSPU SELF-PACED LEARNING MODULE: INTERMEDIATE ACCOUNTING 1