UP Junior Philippine Institute of Accountants

Education and Research Committee

BA 99.1 Third Long Exam (Samplex)
A.Y. 2018-2019

Theory​​:

1. Which method of recording bad debt loss is consistent with accrual accounting?
a) Allowance method
b) Direct writeoff method
c) Percentage of Sales method
d) Percentage of Receivables method

2. When an accounts receivable aging schedule is prepared, a series of computations is made to determine
the estimated uncollectible accounts. The resulting amount from this schedule
a) When added to the total amounts written off during the year is the desired credit balance of the
desired balance of the allowance for doubtful accounts at year-end
b) Is the amount of doubtful accounts expense for the year
c) Is the amount that should be added to the beginning allowance for doubtful accounts to get the
doubtful accounts expense for the year
d) Is the amount of desired credit balance of the allowance for doubtful accounts to be reported at
year-end
3. An entity uses the allowance method to recognize bad debts expense. What is the impact of a
collection of account previously written off?
a) No effect on both allowance for doubtful accounts and bad debts expense
b) No effect on allowance for doubtful accounts and decrease in bad debts expense
c) Increase in allowance for doubtful accounts and no effect on bad debts expense
d) Increase in allowance for doubtful accounts and decrease in doubtful accounts expense
4. Using the allowance method, an account is written off
a) as an adjusting entry
b) at the end of the fiscal period
c) when it is thought to be uncollectible
d) in the period the revenue was recorded
5. Past experience indicates that approximately 1% of Sweeney, Inc.'s net sales will become uncollectible.
If net sales are 300,000.00, estimated uncollectible accounts expense will be
a) 1,000
b) 3,000
c) 30,000
d) Unknown
6. The credit balance in Allowance for Uncollectible Accounts is Php 5,200. The estimated uncollectible
accounts expense using the percentage of net sales method is 42,500. After the adjusting entry has been
recorded, the balance in Allowance for Uncollectible Accounts will be ____.
a) Credit of 47,700
b) Credit of 42,500
c) Credit of 37,300
d) Credit of 5,200

E&R 60.1 | Shannen | Marielle | Raphael | Chiqui

7. ​A company uses the percentage of receivables is estimating doubtful accounts. It estimates that 4% of
its 500,000 of accounts receivable will be uncollectible. Its Allowance for Doubtful Accounts presently
has a credit balance of $8,000. The adjusting entry will include a __________ to the Allowance for
Doubtful Accounts.
a) Debit Of 12,000
b) Credit Of 12,000
c) Debit Of 28,000
d) Credit Of 28,000
8. Net sales on account are 300,000. The beginning book value of accounts receivable is 40,000. The
ending book value of accounts receivable is 30,000. The accounts receivable turnover ratio is ____.
a) 7.5 times
b) 10 times
c) 8.6 times
d) 4.3 times
9. In the allowance method, an account writeoff would:
a) Increase bad debts expense
b) Decrease net receivables
c) Have no effect on net receivables
d) Increase allowance for doubtful accounts
10. Augustine, Inc. had an accounts receivable turnover ratio of 8.3 last year. Its turnover ratio for the
current year is 8.6. From last year to this year, Augustine's average number of days for payment has ____.
a) Increased
b) Decreased
c) Stayed the same
d) Can’t be determined from information given
11. A company's average number of days for payment is 48. Its accounts receivable turnover ratio (using
365 days in a year) is
a) 7.0
b) 7.4
c) 7.5
d) 7.6
12. Dishonored notes receivable would involve:
a) A debit to bad debts expense
b) A credit to allowance for doubtful accounts
c) A debit to accounts receivable
d) A warrant of arrest
13. Using the allowance method, writing off an account would entail:
a) A debit to Bad Debts Expense
b) A debit to Accounts Receivable
c) A credit to Bad Debts Expense
d) A credit to Accounts Receivable
14. Depreciation of fixed assets is an accounting process for the purpose of
a) Asset valuation for statement of financial position purposes
b) Asset valuation based on economic data
c) Cost allocation for financial reporting purposes

E&R 60.1 | Shannen | Marielle | Raphael | Chiqui

 d) Accounting for costs to reflect the change in general price levels
15. In computing depreciation, which of the following methods ignore the residual value of the asset?
a) Straight line
b) Units-of-output
c) Double-declining-balance
d) Sum-of-the-years-digits
16. Which of the following depreciation methods is computed in the same way as depletion?
a) Straight line
b) Sum-of-the-year’s-digits
c) Double-declining-balance
d) Units-of-output
17. The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale were
a) Less than the current market value
b) Greater than cost
c) Greater than the book value
d) Less than book value
18. At purchase, PPE should be measured at”
a) Cost
b) Net realizeable value
c) Current Market Value
d) Current selling price
19. The useful life of a patent is
a) Equal to its legal life
b) Equal to the period economic benefits are expected
c) The shorter of the two
d) The longer of the two
20. Which of the following methods of depreciation would result in the highest depreciation expense in
the first years of the PPE?
a) Double declining balance
b) Sum-of-year’s-digits
c) Straight line
d) Not enough information
21. Which of the following methods of depreciation would result in the highest depreciation expense in
the final years of the PPE?
a) Double declining balance
b) Sum-of-year’s-digits
c) Straight line
d) Not enough information

E&R 60.1 | Shannen | Marielle | Raphael | Chiqui

Short Problems
1. Somebody included the following information regarding its receivables:
Accounts Receivable from Meelo Co. for sale of P180,000 worth of inventory
IOU from company president for P156,000
Notes Receivable from customers for P560,000
Interest Receivable on the previous note of P50,000
Advance of P10,000 for employee of the month
How much is Somebody’s trade receivables?

2. For numbers 2 and 3: Yokosa Consulting recorded the following on its Allowance for Doubtful
Accounts:
ADA at January 1, 2018 - P34,050, credit
Accounts written off - P5,650
Accounts previously written off but recovered and collected during the year - P2,340
Yokosa Consulting uses the Aging of Receivables Method and estimates uncollectible A/R at the end of
the year of P45,750.

2. What is Yokosa Consulting’s Bad Debts Expense for 2018?

3. What is Yokosa Consulting’s ADA at December 31, 2018 if it estimates P26,870 of its net credit sales
as uncollectible?

4. The following information was recovered from the records of Zuko Clothing:
Accounts Receivable, 12/31/18 600,000
ADA (before adjustment), 12/31/18 4,000
Sales, 2018 3,000,000
Sales Discounts, 2018 10,000
Sales Returns, 2018 15,000
Assuming the same foregoing data except that the allowance account before adjustment at December 31,
2018 of P4,000 was a debit rather than a credit balance, determine the bad debt expense and the adjusted
balance of Allowance for Doubtful Accounts under the following assumptions:
a. Bad debts adjustment is based on 1% of net sales.
b. An aging schedule of the accounts shows that P20,000 of the accounts is uncollectible.

5. Kirby Company operates in an industry that has a high rate of bad debts. On December 31, 2019,
before any year-end adjustments, the balances in Kirby Company’s Accounts Receivable account was
P3,000,000 and the Allowance for Doubtful Accounts had a credit balance of P50,000. The year-end
balance reported in the balance sheet for the Allowance for Doubtful Accounts will be based on the aging
schedule shown below:
Days Outstanding Amount Probability of Collection

1-30 days past due P 1,750,000 0.98

31-60 days past due 350,000 0.95

E&R 60.1 | Shannen | Marielle | Raphael | Chiqui

 61-90 days past due 450,000 0.90

91-120 days past due 300,000 0.75

Over 120 days past due 150,000 0.40

Receivables written off during the year totaled to P40,000.
a. The appropriate balance of the Allowance for Doubtful Accounts on Dec 31, 2018 is:
b. The amount to be reported as bad debts expense for 2014 is:

6. Aang Motor Company’s unadjusted trial balance at December 31, 2018, included the following
accounts:
Dr. Cr.
Allowance for Bad Debts 4,000
Sales 2,800,000
Sales Returns and Allowances 80,000
Aang Motor Company estimates its bad debts expense to be 2% of net sales. Determine the following:
a. Bad Debts Expense for 2018
b. Allowance for Bad Debts accounts at December 31, 2018

7. For the year ended December 31, 2018, Amon Corporation estimated its allowance for uncollectible
accounts using the year-end aging of accounts receivable. The following data were available:
Allowance for uncollectible accounts, 01/01/18 184,000
Provisions for uncollectible accounts during 2018 (3% on sales of
150,000
P5,000,000)
Uncollectible accounts written off during 2018 90,000
Estimated uncollectible accounts per aging 12/31/18 250,000
After year-end adjustment, the uncollectible accounts expense for 2018 should be ​______.

8. During 2018, Sokka Dairy Productions wrote off uncollectible accounts of P15,000, recovering
accounts of P7,000 that had been written off in 2017. The following information were made available:
Dec. 31, 2018 Dec. 31, 2017
Accounts Receivable 1,000,000 750,000
Net Realizable Value 960,000 725,000
After year-end adjustment, the uncollectible accounts expense for 2018 should be ​______​.

9. Mako Energy Corporation had a P300,000 balance in Accounts Receivable on January 1, 2018. The
balance in Allowance for Bad Debts on January 1, 2018 was P36,000. Sales for the year totaled
P1,700,000. All sales were credit sales. Bad Debts Expense is estimated to be 2% of sales. Write-offs for
the year totaled P28,000. The debit balance in Accounts Receivable, net of ADA, on December 31, 2018
was P345,000. The amount of cash collected from customers is ​______​.

E&R 60.1 | Shannen | Marielle | Raphael | Chiqui

10. The following information was made available about Katara Electronics sales and receivables:
Accounts Receivables, January 1, 2018 350,000
Allowance for Uncollectible Accounts, January 1, 2018 35,000
Sales, all on credit 2,195,000
Sales returns and allowances 5,000
Cash collected from customers’ current accounts, net of sales discounts of
2,110,000
P5,000
Accounts receivables written off during the year 30,000
Recoveries of accounts written off in the previous years 7,000

An aging of accounts receivable at December 31, 2018 indicated the following:

Age % of Total Accounts Probability of
Receivable, end Collection
Current 80% 90%
31-60 days 12% 85%
61-90 days 7% 50%
Over 90 days 1% 1%

Determine the following as of December 31, 2018 (using aging of the receivables method):
a. Gross Accounts Receivable
b. Bad Debts Expense for the year
c. Net Realizable Value of Accounts Receivable

11. UPJPIA Company purchased a patent on January 1, 2013 for P 357,000. The patent was being
amortized over its remaining legal life of 15 years expiring on January 1, 2028. At the beginning of 2016,
UPJPIA Company determined that the economic benefits of the patent would not last longer than ten
years from the date of acquisition. What amount should be reported in the balance sheet as patent, net of
accumulated amortization on December 31, 2016?

12. In 2013, Elie paid P 20,500,000 for land with an estimated P 2,550,000 tons of ore. Elie plans to sell
the land for P 3,380,000 when all of the ore has been extracted. During the year, 463,000 tons of ore were
mined and sold. What is the book value then at the end of 2013?

For numbers 13 to 16: Use the information below.

Cost of equipment P 850,000
Estimated residual value P 40,000
Estimated life 5 years
Acquisition date 1/1/2013 (unless otherwise stated)
13. Assume the company uses the straight-line method of depreciation. If at the beginning of 2016, the
original estimated life is revised to 8 years, what should be the book value of the equipment at the end of
2016?
14. Assume that the company uses double-declining balance depreciation. After recording three full years
of depreciation, they decide to switch to straight-line depreciation. What is the balance of accumulated
depreciation at the end of 2016?

E&R 60.1 | Shannen | Marielle | Raphael | Chiqui

15. Assume the equipment was purchased on August 1, 2013, if the company uses straight-line
depreciation, what should be reported as accumulated depreciation for 2017?

16. Assume the company uses double-declining balance depreciation and sells the equipment after two
years for P 402,800. What amount of gain/loss should be reported in the 2014 income statement?

17. Santos Company’s depreciation policy on machinery and equipment is as follows:

▪ A full year’s depreciation is taken in the year of an asset’s acquisition.
▪ No depreciation is taken in the year of an asset’s disposition.
▪ The estimated useful life is 5 years.
▪ The straight-line method is used.

On June 30, 2018, Santos sold for P 575,000 a machine acquired in 2013 for P 1,050,000. The estimated
salvage value was 150,000. How much gain or (loss) on the disposal should Santos Company
record in 2018?

18. On January 1, the start of the year, E&R60 Company disposed of their plant asset. The asset originally
cost P 500,000 and had accumulated depreciation of P 440,000.
a. Assuming the asset was sold for P 20,000, what is the gain/loss from the transaction?
b. Assuming the asset was sold for P 90,000, what is the gain/loss from the transaction?

19. Rachel and Friends Company recently acquired two items of equipment. The transactions are
described as follows:
▪ Acquired a press at an invoice price of P 3,000,000 subject to a 5% cash discount which was
taken. Costs of freight and insurance during shipment were P 50,000 and installation costs
amounted to P 200,000
▪ Acquired welding machine at an invoice price of P 2,000,000 subject to a 10% discount which
was not taken. Additional welding supplies were acquired at a cost of P 100,000.
What should be the increase in equipment as a result of the transactions?

20. During the current year, Hello hello Company had the following transactions pertaining to its new
office building:

Purchase price of land P 600,000

Legal fees for contract to purchase land P 20,000
Architect fee P 80,000
Demolition of old building on site P 50,000
Sale of scrap of old building P 30,000
Construction cost of new building P 3,500,000

In Hello hello Company’s year-end statement of financial position, what amounts should be reported as
land and building?

E&R 60.1 | Shannen | Marielle | Raphael | Chiqui

21. On January 1, 2018, Valix Company bought a trademark from De Leon Company for P 3,000,000.
The trademark was considered to have an indefinite life. Its carrying amount in Valix’s accounting
records was P 1,500,000. In De Leon’s December 31, 2017 statement of financial position, what amount
should be reported as trademark?

22. On July 1, 2018, UP JPIA Company, a calendar-year corporation, purchased the rights to a mine. The
total purchase price was P 3,200,000 of which 400,000 were allocable to the land. Estimated reserves
were 1,600,000 tons. The expected extraction was 25,000 per month. UP JPIA Company purchased new
equipment on July 2, 2018. The equipment cost P 6,600,000 and had a useful life of 8 years. However,
after all the resources are removed, the equipment will be of no use and will be sold for P 200,000.

What amount of depletion and depreciation should be reported in its 2018 Income Statement?

--- END ---

Good Luck! :)

E&R 60.1 | Shannen | Marielle | Raphael | Chiqui