11.

An entity provided the following information for the current year:

Accounts receivable – January 1 2,000,000.00
Credit sales 10,000,000.00
Collection from customers, excluding recovery of accounts written off 7,500,000.00
Accounts written off as worthless 100,000.00
Sales returns 400,000.00
Recovery of accounts written off 50,000.00
Estimated future sales returns on December 31 300,000.00
Estimated uncollectible accounts on December 31 per aging 600,000.00
What is the “amortized cost” of accounts receivable on December 31?
a. 4,000,000 b. 3,700,000 c. 3,450,000 d. 3,100,000

AR
2,000,000.00 7,500,000.00 4,000,000.00
10,000,000.00 100,000.00 - 300,000.00
50,000.00 400,000.00 - 600,000.00
50,000.00 3,100,000.00
12,050,000.00 8,050,000.00
4,000,000.00

12. An entity provided the following data for the current year:

Allowance for doubtful accounts January 1 180,000.00

Sales 9,500,000.00
Sales returns and allowances 800,000.00
Sales discount 200,000.00
Accounts written off as uncollectible 200,000.00

The entity provided for doubtful accounts expense at the rate of 5% of net sales . What amount should be reported as doubtful accounts expense for the current year?
a. 435,000 b. 425,000 c. 475,000 d. 415,000

Allowance for doubtful accounts Gross sales 9,500,000.00

180,000.00 Sales returns and al - 800,000.00
200,000.00 425,000.00 Sales discount - 200,000.00
200,000.00 605,000.00 Net sales 8,500,000.00
0.05
425,000.00

13. An entity provided the following accounts abstracted from the unadjusted trial balance at year-end:
Debit Credit
Accounts receivable 5,000,000.00
Allowance for doubtful accounts 100,000.00
Net credit sales 20,000,000.00
The entity estimated that 10% of the gross accounts receivable will become uncollectible.
What amount should be recognized as doubtful accounts expense for the current year?
a. 500,000 b. 400,000 c. 200,000 d. 600,000

Allowance for doubtful accounts

100,000.00
600,000.00
- 500,000.00

14. An entity used the net price method of accounting for cash discounts. In one of its transactions on December 26, 2021, the entity sold merchandise with a list price of P5,000,000 to a client who was
given a trade discount of 20%, 10% and 5%. Credit terms were 4/10, n/30. The goods were shipped FOB destination, freight collect. Total freight charge paid by the client was P100,000. On December
27, 2021, the client returned damaged goods originally billed at P500,000. What is the net realizable value of the accounts receivable on December 31, 2021?
a. 3,420,000 b. 2,920,000 c. 2,703,200 d. 2,803,200

5,000,000*.80*.90*.95 Invoice price 3,420,000.00 AR

0.96
Net of CD 3,283,200.00
Sales returns - 480,000.00
Freight charge - 100,000.00
2,703,200.00

From inception of operations, an entity provided for doubtful accounts under the allowance method and provisions were made monthly at 2% of credit sales. No year-end adjustments to the allowance
account were made. The balance in the allowance for doubtful accounts was P1,000,000 on January 1, 2021. During 2021, credit sales totaled P20,000,000, interim provisions for doubtful accounts were made
at 2% of credit sales, P200,000 of bad debts were written off, and recoveries of accounts previously
written off amounted to P50,000. An aging was made on December 31, 2021.

Classification Balance Uncollectible

November - December 6,000,000.00 0.10 600,000.00
July - October 2,000,000.00 0.20 400,000.00
January - June 1,500,000.00 0.30 450,000.00
Prior to January 1, 2021 500,000.00 0.50 (500,000-100,000) 200,000.00
Based on the review of collectibility of the account balances in the “prior to January 1, 2021” aging category, additional accounts totaling P100,000 are to be written off on December 31, 2021. Effective
December 31, 2021, the entity adopted aging method for estimating the allowance for doubtful accounts.

15. What amount should be reported as doubtful accounts expense for current year?
a. 1,200,000 b. 1,650,000 c. 900,000.00 d. 950,000.00

Allowance for doubtful accounts

1,000,000.00
200,000.00 50,000.00
100,000.00

900,000.00
- 1,650,000.00

16. What is the net realizable value of accounts receivable on December 31, 2021?
a. 9,900,000 b. 8,250,000 c. 8,350,000 d. 8,200,000

November - December 6,000,000.00

July - October 2,000,000.00
January - June 1,500,000.00
Prior to January 1, 2021 400,000.00
9,900,000.00
- 1,650,000.00
8,250,000.00
An entity provided the following transactions affecting accounts receivable during the current year:
Sales – cash and credit 5,900,000.00
Cash received from credit customers, all of whom took advantage of the discount feature of the credit terms 4/10, n/30 3,024,000.00
Cash received from cash customers 2,100,000.00
Accounts receivable written off as worthless 50,000.00
Credit memorandum issued to credit customers for sales return and allowances 250,000.00
Cash refunds given to cash customers for sales returns and allowances 20,000.00
Recoveries on accounts receivable written off as uncollectible in prior periods not included in cash received from customers stated above 80,000.00

At the beginning of current year, the balances are accounts receivable P950,000 and the allowance for bad debts P100,000. At year-end, an aging of accounts receivable indicated that P170,000 would be uncollectible.

17. What is the balance of accounts receivable on December 31?

a. 1,300,000 b. 1,426,000 c. 1,280,000 d. 1,220,000
Sales – cash and credit 5,900,000.00
Cash received from cash customers - 2,100,000.00
AR Credit sales 3,800,000.00
950,000.00 3,150,000.00
3,800,000.00 50,000.00
80,000.00 250,000.00
80,000.00 (3,024,000/.96)
3,150,000.00
4,830,000.00 3,530,000.00
1,300,000.00

18. What amount was recognized as bad debt expense for the current year?
a. 70,000 b. 40,000 c. 90,000 d. 50,000

Allowance for doubtful accounts

100,000.00
50,000.00 80,000.00
40,000.00
- 170,000.00

19. At January 1, 20x1, Judy Co. had a credit balance of ₱260,000 in its allowance for uncollectible accounts. Based on past experience, 2% of Judy 's credit sales have been uncollectible. During 20x1, Judy
wrote off ₱325,000 of uncollectible accounts. Credit sales for 20x1 were ₱9,000,000. In its December 31, 20x1, balance sheet, what amount should Judy report as allowance for uncollectible accounts?

a. 115,000 b. 180,000 c. 245,000 d. 440,000

Allowance for doubtful accounts Bad debt expense

260,000.00 9M*2%
325,000.00 180,000.00

- 115,000.00

20. On the December 31, 20x6, balance sheet of Esther Co., the current receivables consisted of the following:

Trade accounts receivable 93,000.00

Allowance for uncollectible accounts - 2,000.00
Claim against shipper for goods lost in transit (November 20x6) 3,000.00
Selling price of unsold goods sent by Esther on consignment at 130% of cost (not included in Esther's ending inventory) 26,000.00
Security deposit on lease of warehouse used for storing some inventories 30,000.00
Total 150,000.00
At December 31, 20x6, the correct total of Esther's current net receivables was
a. 94,000 b. 120,000 c. 124,000 d. 150,000

Trade accounts receivable 93,000.00

Allowance for uncollectible accounts - 2,000.00
Claim against shipper for goods lost in transit (November 20x6) 3,000.00
94,000.00

21. The following information is from the records of Prosser, Inc. for the year ended December 31, 2002.

Allowance for Doubtful Accounts, January 1, 2002 .. 6,000.00

Sales, 2002 ....................................... 2,920,000.00
Sales Returns and Allowances, 2002 ................ 32,000.00
If the basis for estimating bad debts is 1 percent of net sales, the correct amount of doubtful accounts expense for 2002 is
a. ₱22,800. b. ₱23,200. c. ₱28,880 d. ₱34,880.

Gross sales 2,920,000.00

Sales returns - 32,000.00
Net sales 2,888,000.00
0.01
28,880.00

22. An analysis and aging of the accounts receivable of Shriner Company at December 31 revealed the following data:

Accounts Receivable .................................. 450,000.00

Allowance for Doubtful Accounts (before adjustment) .. 25,000.00 (cr)
Required ending balance of allowance ............... 32,000.00 (cr)

The net realizable value of the accounts receivable at December 31 should be

a. ₱450,000. b. ₱443,000. c. ₱425,000. d. ₱418,000.

Accounts Receivable .................................. 450,000.00

Required ending balance of allowance ............... - 32,000.00
418,000.00

23. Maple Company provides for doubtful accounts expense at the rate of 3 percent of credit sales. The following data are available for last year:

Allowance for Doubtful Accounts, January 1 ........ 54,000.00 (cr)

Accounts written off as uncollectible during the year ............. 60,000.00
Collection of accounts written off in prior years .(customer credit was re-established) ..... 15,000.00
Credit sales, year-ended December 31 .............. 3,000,000.00

The allowance for doubtful accounts balance at December 31, after adjusting entries, should be
a. ₱45,000. b. ₱84,000. c. ₱90,000. d. ₱99,000.

Allowance for doubtful accounts

54,000.00
60,000.00 15,000.00
90,000.00
99,000.00
 24. Based on the aging of its accounts receivable at December 31, Pribob Company determined that the net realizable value of the receivables at that date is ₱760,000. Additional information is as follows:
Accounts Receivable at December 31 ................ 880,000.00
Allowance for Doubtful Accounts at January 1 ...... 128,000.00 (cr)
Accounts written off as uncollectible during the 88,000.00

Pribob's doubtful accounts expense for the year ended December 31 is

a. ₱80,000. b. ₱96,000. c. ₱120,000. d. ₱160,000.
Allowance for doubtful accounts
128,000.00 Gross receivables 880,000.00
88,000.00 Allowance for doubtful accounts - 120,000.00
80,000.00 Net realizable 760,000.00
120,000.00

25. Based on its past collection experience, Ace Company provides for bad debts at the rate of 2 percent of net credit sales. On January 1, 2002, the allowance for doubtful accounts credit
balance was ₱10,000. During 2002, Ace wrote off ₱18,000 of uncollectible receivables and recovered ₱5,000 on accounts written off in prior years. If net credit sales for 1999 totaled
₱1,000,000, the doubtful accounts expense for 2002 should be

a. ₱17,000. b. ₱20,000. c. ₱23,000. d. ₱35,000.

26. Richards Company uses 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.
No. of Days Probability
Outstanding Amount of Collection
0-30 days 500,000.00 0.98
31-60 days 200,000.00 0.90
Over 60 days 100,000.00 0.80

The following additional information is available for the current year:

Net credit sales for the year .................. 4,000,000.00
Allowance for Doubtful Accounts:
Balance, January 1 ............................. 45,000.00 (cr)
Balance before adjustment, December 31 ......... 2,000.00 (dr)

If Richards determines bad debt expense using 1.5 percent of net credit sales, the net realizable value of accounts receivable on the December 31 balance sheet will be
a. ₱738,000. b. ₱740,000. c. ₱742,000. d. ₱750,000

Using aging of AR: 4000000*.015

0-30 days 10,000.00 bad debt expense 60,000.00
31-60 days 20,000.00
Over 60 days 20,000.00
All. For doubtful accounts, end 50,000.00 Gross receivables 800,000.00
All. For doubtful accounts, beg. 45,000.00
Allowance for doubtful accounts Provision 60,000.00
45,000.00 Write-off - 47,000.00 - 58,000.00
47,000.00 742,000.00

2,000.00

27. Gekko, Inc. reported the following balances (after adjustment) at the end of 2002 and 2001.
12/31/2002 12/31/2001
Total accounts receivable ................. 105,000.00 96,000.00
Net accounts receivable ................... 102,000.00 94,500.00
Allowance for doubtful accounts 3,000.00 1,500.00
During 2002, Gekko wrote off customer accounts totaling ₱3,200 and collected ₱800 on accounts written off in previous years. Gekko's doubtful accounts expense for the year ending December 31, 2002 is
a. ₱1,500. b. ₱2,400. c. ₱3,000. d. ₱3,900.

Allowance for doubtful accounts

1,500.00
3,200.00 800.00
3,900.00
3,000.00

28. Gray Company had an accounts receivable balance of ₱50,000 on December 31, 2001, and ₱75,000 on December 31, 2002. The company wrote off ₱20,000 of accounts receivable during 2002, and collected ₱3,000 on
an account written off in 2000. Sales for the year 2002 totaled ₱620,000. All sales were on account. The amount collected from customers on accounts receivable during 2002, including recoveries, was

a. ₱575,000. b. ₱578,000. c. ₱600,000. d. ₱595,000.

AR
50,000.00
Re-establishment of AR for the recovery 3,000.00 20,000.00 Write-off
Sales 620,000.00 - 578,000.00
75,000.00

On December 1, 2021, an entity assigned on a nonnotification basis accounts receivable of P5,000,000 to a bank in consideration for a loan of 80% of the accounts less a 5% service fee on the accounts assigned. The entity
signed a note for the bank loan.
On December 31, 2021, the entity collected assigned accounts o P2,000,000 less discount of P200,000. The entity remitted the collections to the bank in partial payment for the loan.
The bank applied first the collection to the interest and the balance to the principal. The agreed interest is 1% per month on the loan balance.
The entity accepted sales returns of P100,000 on the assigned accounts and wrote off assigned accounts of P300,000.
29. What is the balance of accounts receivable assigned on December 31, 2021?
a. 3,000,000 b. 2,600,000 c. 2,400,000 d. 2,900,000
Sales returns 100,000.00
AR -assigned, beg. 5,000,000.00 AR - Assigned 5M AR - Assigned 100,000.00
Collection - 2,000,000.00 AR 5M
Sales returns - 100,000.00 Cash 1,800,000.00 All. For doubtful accounts 300,000.00
account written off - 300,000.00 Sales discount 200,000.00 AR - Assigned 300,000.00
2,600,000.00 AR- Assigned 2,000,000.00
30. What is the equity of the assignor in assigned accounts on December 31, 2021?
a. 2,600,000 b. 2,240,000 c. 360,000.00 d. -

Remaining AR Assigned 2,600,000.00 5,000,000.00 Cash 3,800,000.00

Remaining payable - 2,240,000.00 0.80 Service fee 200,000.00
360,000.00 Total NP 4,000,000.00 Note payable 4,000,000.00
Partial payment - 1,760,000.00
Remaining payable 2,240,000.00 Interest expense 4M * .01

Amount collected 1,800,000.00

Payment of interest - 40,000.00
Amount remaining to the principal 1,760,000.00

An entity factored P5,000,000 of accounts receivable. Control was surrendered by the entity. The transaction met the criteria to be accounted for as sale but subject to recourse for nonpayment. The fair
value of the recourse obligation is P250,000.
The finance company assessed a fee of 6% and retained a holdback equal to 10% of the accounts receivable. In addition, the finance company charged 12% interest computed on a weighted average time to
maturity of the accounts receivable for 60 days.
31. What amount was initially received from the factoring of accounts receivable?
a. 4,500,000 b. 4,200,000 c. 4,100,000 d. 4,101,370
Finance Charge Factor's holdback Weighted average time to maturity
5,000,000.00 5000000
0.06 10% (5M *.12*(60/365)
300,000.00 500000 98,630.00

Accounts receivable (gross) 5,000,000.00

Less: Finance Charge - 300,000.00
Factor's holdback - 500,000.00
Weighted average time to maturity - 98,630.00
Net proceeds 4,101,370.00
32. What total amount should be recognized initially as loss on factoring?
a. 398,630 b. 898,630 c. 800,000 d. 648,630

Cash 4,101,370.00
Receivable from factor 500,000.00
Loss on factoring 648,630.00
Provision on recourse obligation 250,000.00
Accounts receivable 5,000,000.00

33. What amount should be reported as loss on factoring assuming the accounts are fully collected by the factor?
a. 398,630 b. 300,000 c. 550,000 d. 400,000

34. An entity sells goods either on cash basis or on 6-month installment basis. On January 1, 20x1, goods with cash price of ₱50,000 were sold at an
installment price of ₱75,000. Which of the following statements is correct?
a. Net receivable of ₱75,000 is recognized on the date of sale.
b. Net receivable of ₱50,000 is recognized upon full payment of the total price.
c. The ₱20,000 difference between the cash price and installment price is recognized as interest income on the date of sale.
d. Net receivable of ₱50,000 is recognized on the date of sale.

35. An entity sells goods for ₱150,000 to a customer who was granted a special credit period of 1 year. The entity normally sells the goods for ₱120,000 with a credit period of one month or
with a ₱10,000 discount for outright payment in cash. How much is the initial measurement of the receivable?

a. 150,000 b. 120,000 c. 130,000 d. 110,000

On January 1, 20x1, ABC Co. sold a transportation equipment with a historical cost of ₱1,000,000 and accumulated depreciation of ₱300,000 in exchange for cash of ₱100,000 and a noninterest-bearing note
receivable of ₱800,000 due on January 1, 20x4. The prevailing rate of interest for this type of note is 12%.

36. How much is the interest income in 20x1?

a. 68,331 b. 76,532 c. 85,714 d. 96,000

PV of P1
PV Factor 0.71178 *800,000 569,424.20 Present Value (1/1/20x1)
12%
68,330.90

37. How much is the carrying amount of the receivable on December 31, 20x2?
a. 800,000 b. 569,424 c. 637,755 d. 714,286

(569424*1.12*1.12)

On January 1, 20x1, ABC Co. sold transportation equipment with a historical cost of ₱20,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱500,000 and a noninterest-bearing
note receivable of ₱8,000,000 due in 4 equal annual installments starting on December 31, 20x1 and every December 31 thereafter. The prevailing rate of interest for this type of note is 12%.

38. How much is the interest income in 20x1?

a. 728,946 b. 678,334 c. 728,964 d. 704,236
PV of ordinary annuity
PV Factor 3.0373
Annual installment 2,000,000.00
Present value 6,074,600.00
Interest rate 0.12
728,952.00
39. How much is the current portion of the
receivable on December 31, 20x1?
a. 1,271,036 b. 1,423,560 c. 3,380,102 d. 1,594,388
Annual payment Annual Amortizat Preset value
1/1/20x1 6,074,600.00
12/31/20x1 2,000,000.00 728,952.00 4,803,552.00 ########## Current portion
12/31/20x2 2,000,000.00 576,426.24 3,379,978.24 Noncurrent portion

40. How much is the carrying amount of the

receivable on December 31, 20x2?
a. 4,803,663 b. 3,380,102 c. 6,074,699 d. 6,000,000

On January 1, 20x1, ABC Co. sold transportation equipment with a historical cost of ₱12,000,000 and accumulated depreciation of ₱7,000,000 in exchange for cash of ₱100,000 and a noninterest-bearing
note receivable of ₱4,000,000 due in 4 equal annual installments starting on January 1, 20x1 and every January 1 thereafter. The prevailing rate of interest for this type of note is 12%.

41. How much is the interest income in 20x1?

a. 408,230 b. 278,334 c. 328,964 d. 288,220
PV of annuity due
PV Factor 3.40183
Annual installment 1,000,000.00
Present value 3,401,830.00
Less: advance payment 1,000,000.00
Receivable balance (1/1/20x1) 2,401,830.00
Interest rate 0.12
288,219.60

42. How much is the carrying amount of the

receivable on December 31, 20x1?
a. 1,690,510 b. 892,857 c. 2,690,051 d. 1,594,388
Annual payment Annual Amortizat Preset value
1/1/20x1 3,401,830.00
1/1/20x1 1,000,000.00 2,401,830.00
12/31/20x1 288,219.60 2,690,049.60
1/1/20x2 1,000,000.00 1,690,049.60
12/31/20x2 202,805.95 1,892,855.55
1/1/20x3 1,000,000.00 892,855.55
43. How much is the carrying amount of the
receivable on January 1, 20x3?
a. 892,857 b. 3,380,102 c. 6,074,699 d. 6,000,000

44. On January 1, 20x1, ABC Co. sold machinery with historical cost of ₱3,000,000 and accumulated depreciation of ₱900,000 in exchange for a 3-year, ₱2,100,000 noninterest-bearing note receivable due in
equal semi-annual payments every July 1 and December 31 starting on July 1, 20x1. The prevailing rate of interest for this type of note is 10%.

How much is the interest income in 20x1?

a. 88,825 b. 177,649 c. 128,964 d. 164,591
PV of ordinary annuity (1,776,491.50*1.05 - 350000)
PV Factor 5.07569 Present value (7/1/20x1) 1,515,316.08
Semi-annual installment 350,000.00 Interest rate 0.05
Present value 1,776,491.50 Interest income 12/31/20x1 75,765.80
Interest rate 0.05
Interest income 7/1/20x1 88,824.58
45. On January 1, 20x1, ABC Co. sold machinery costing ₱3,000,000 with accumulated depreciation of ₱1,100,000 in exchange for a 3-year, ₱900,000 noninterest-bearing note receivable
due as follows:

Date Amount of installment

December 31, 20x1 400,000.00
December 31, 20x2 300,000.00
December 31, 20x3 200,000.00
Total 900,000.00
The prevailing rate of interest for this type of note is 10%. How much is the carrying amount of the receivable on December 31, 20x1?
a. 467,354 b. 438,016 c. 376,345 d. 428,346

PV of P1 PV Factor PV
400,000.00 0.90910 363,640.00
300,000.00 0.82645 247,935.00
200,000.00 0.75131 150,262.00
761,837.00

Annual payment Annual Amortizat Preset value

1/1/20x1 761,837.00
12/31/20x1 400,000.00 76,183.70 438,020.70
An entity accepted from a customer in settlement of an account a P5,000,000. 180-day 9% note dated August 1, 2021. On September 30, 2021, the entity discounted the note at 12% with recourse at the
bank. The note was paid in full by the maker on maturity. The discounting is accounted for as a conditional sale with recognition of a contingent liability.

46. What amount was received from the note

receivable discounting?
a. 5,225,000 b. 5,075,000 c. 5,016,000 d. 5,000,000
Principal 5,000,000.00
Interest (5M * 9% * 180/360) 225,000.00
Maturity value 5,225,000.00
Discount (5,225,000*.12*(120/360) - 209,000.00
Net proceeds 5,016,000.00

47. What is the loss on note receivable discounting?

a. 59,000 b. 16,000 c. 75,000 d. 60,000

Principal 5,000,000.00
Accrued interest income (5M*.09*60/360) 75,000.00
Total receivables 5,075,000.00
Less: net proceeds 5,016,000.00
- 59,000.00
48. On April 1, 2021, an entity discounted with recourse a 9-month, 10% note dated January 1, 2021 with face of P6,000,000. The bank discount rate is 12%. The discounting transaction is
accounted for as a conditional sale with recognition of contingent liability.

On October 1, 2021, the maker dishonored the note receivable. The entity paid the bank the maturity value of the note plus protest fee of P50,000.
On December 31, 2021, the entity collected the dishonored note in full plus 12% annual interest on the total amount due.
What amount was received from the note receivable discounting?
a. 6,063,000 b. 6,450,000 c. 6,150,000 d. 5,963,000 e. 6,662,500

Principal 6,000,000.00
Interest (6M * 10% * 9/12) 450,000.00
Mnaturity value 6,450,000.00
Discount (6,450,000*.12*(6/12) - 387,000.00
Net proceeds 6,063,000.00

On January 1, 2021, an entity sold a building with carrying amount of P6,000,000 in exchange for a noninterest bearing note requiring ten annual payments of P1,000,000. The first payment
was made on December 31, 2021. The market interest rate for similar notes at date of issuance was 8%. The present value of an ordinary annuity of 1 at 8% is 6.71 for ten periods. The
present value of an annuity due of 1 at 8% is 7.25 for ten periods.

49. What is the interest income for 2021?

a. 500,000 b. 580,000 c. 536,800 d. 376,800

PV of ordinary annuity 6.71

Annual installment 1,000,000.00
Present value 6,710,000.00
Interest income 8%
536,800.00

50. What is the carrying amount of note receivable on December 31, 2021?
a. 6,246,800 b. 7,246,800 c. 6,830,000 d. 6,750,000

PV (1/1/20X1) 6,710,000.00
Interest income 536,800.00
Annual amortization - 1,000,000.00
6,246,800.00