PAMANTASAN NG LUNGSOD NG VALENZUELA

FAR 2 – CONCPTUAL FRAMEWORK AND ACCOUNTING STANDARDS

FLE 01 – Trade and Other Receivables

NAME: SECTION: SCORE:

I. Theories:

_____ 1. Trade receivables are classified as current assets when they are reasonable expected to be collected
a. Within one year
b. Within normal operating cycle
c. Within one year or within the normal operating cycle, whichever is shorter
d. Within one year or within the normal operating cycle, whichever is longer

_____ 2. If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken
should be reported as
a. a deduction from sales in the income statement.
b. an item of "other income and expense" in the income statement.
c. a deduction from accounts receivable in determining the net realizable value of accounts receivable.
d. sales discounts forfeited in the cost of goods sold section of the income statement.

_____ 3. Which of the following should be recorded in Accounts Receivable?

a. Receivables from officers c. Sale of goods on account to a customer
b. Receivables from subsidiaries d. Dividend receivable

_____ 4. Which of the following accounts is not affected when an account receivable written off as uncollectible is recovered?
a. Cash c. Accounts receivable
b. Bad debts expense d. Allowance for bad debts

_____ 5. Which of the following transaction will decrease the recorded accounts receivable?
a. Sale of goods on account.
b. Collection of accounts previously written off.
c. Return of goods sold to a customer on account.
d. Cash discount availed using the net method.

_____ 6. Jedrick Company prepares an account receivable aging schedule with a series of computations as follows: 2% of the total
peso balance of accounts from 1-60 days past due, plus 5% of the total peso balance of accounts from 61-120 days past due
and so on. How would you describe the total of the amounts determined in this series of computations
a. It is the amount of uncollected accounts expense for the year.
b. It is the amount that should be added to the allowance for uncollectible accounts at year-end.
c. It is the amount of the desired credit balance of the allowance for uncollectible accounts to be reported in the year-end
financial statements.
d. When added to the total of accounts written off during the year, this new sum is the desired credit balance of the
allowance account.

_____ 7. When the allowance method of recognizing uncollectible account expense is used, the entries at the time of collection of an
account previously written off would
a. Increase profit.
b. Increase the amortized cost of accounts receivable.
c. Decrease profit.
d. Decrease the amortized cost of accounts receivable.

_____ 8. Courage Company, which has an adequate amount in its allowance for doubtful accounts, write-off as uncollectible an
account receivable from a bankrupt customer. This action will:
a. Have no effect on total current assets c. Reduce total current assets
b. Reduce net income for the period d. Reduce the amount of total equity

_____ 9. Why do companies provide trade discounts?

a. To avoid frequent changes in catalogs. c. To easily alter prices for different customers.
b. To induce prompt payment. d. Both A and C.

_____ 10. When a customer purchases merchandise inventory from a business organization, she may be given a discount which is
designed to induce prompt payment. Such discount is called a(n)
a. Trade discount c. Enhancement discount
b. Nominal discount d. Cash discount

_____ 11. What is the normal entry when writing-off an account as uncollectible under the allowance method?
a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.
c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.
d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

FAR 2: MLE 01 S.Y. 2022-2023, 2nd Semester jvacpa Page 1 of 5

_____ 12. Which of the following is included in the normal journal entry to record the collection of accounts receivable previously
written off when using the allowance method?
a. Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
b. Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.
c. Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.
d. Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

_____ 13. Which of the following methods of determining annual bad debt expense best achieves the matching concept?
a. Percentage of sales
b. Percentage of average accounts receivable
c. Percentage of ending accounts receivable
d. Direct write-off

_____ 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. The advantage of relating a company’s bad debt expense to its outstanding accounts receivable is that this approach
a. Gives a reasonably correct statement of receivables in the balance sheet.
b. Best relates bad debt expense to the period of sale.
c. Is the only generally accepted method for valuing accounts receivable.
d. Makes estimates of uncollectible accounts unnecessary.

II. Problems:

An entity provided the following information for 2019:

Accounts receivable – January 1 P 2,000,000
Credit sales 10,000,000
Collection from customers, excluding recovery of accounts written off 8,000,000
Accounts written off as worthless 100,000
Sales return 500,000
Recovery of accounts written off 50,000
Estimated future sales return as of December 31 150,000
Estimated uncollectible accounts on December 31 per aging 300,000

1. What is the “amortized cost” of accounts receivable on December 31, 2019?

a. P 3,400,000 c. P 2,950,000
b. P 3,100,000 d. P 2,900,000

During the current year, an entity reported beginning allowance for doubtful accounts P200,000, sales P9,500,000, sales returns and
allowances P1,000,000, sales discounts P500,000, accounts written off P300,000 and recovery of accounts written off P50,000. It is
estimated that 5% of net sales may prove uncollectible.

2. What amount should be reported as doubtful accounts expense?

a. P 400,000 c. P 450,000
b. P 425,000 d. P 475,000

3. What is the ending allowance for doubtful accounts?

a. P 350,000 c. P 400,000
b. P 375,000 d. P 300,000

On December 31, 2019, an entity reported accounts receivable of P6,000,000 and allowance for doubtful accounts of P1,000,000 on
January 1, 2019.

Doubtful accounts are provided for as percentage of net credit sales. The percentage is computed annually by using the data of the
three years prior to the current year.
Net Credit Sales Writeoffs Recoveries
2016 9,000,000 400,000 30,000
2017 13,000,000 600,000 70,000
2018 15,000,000 700,000 120,000
2019 20,000,000 650,000 150,000

4. What amount should be reported as doubtful accounts expense for 2019?

a. P 800,000 c. P 500,000
b. P 650,000 d. P 600,000

5. What is the allowance for doubtful accounts on December 31, 2019?

a. P 1,300,000 c. P 1,150,000
b. P 1,950,000 d. P 1,800,000
FAR 2: FLE 01 S.Y. 2022-2023, 2nd Semester jvacpa Page 2 of 4
RRR Corp.’s accounts receivable subsidiary ledger shows the following information:
Account Balance Invoice
Customer
December 31, 2018 Date Amount
Aruy, Inc P 35,180 12/06/18 P 14,000
11/29/18 21,180

Naku Co. 20,920 09/27/18 12,000

08/20//18 8,920

Syak Corp. 30,600 12/08/18 20,000

10/25/18 10,600

Trip Co. 45,140 11/17/18 23,140

10/09/18 22,000

Uy Co. 31,600 12/12/18 19,200

12/02/18 12,400

Xak Corp. 17,400 09/12/18 17,400

The estimated bad debt rates below are based on RRR Corp.’s receivable collection experience.
Age of Accounts Rate
0 - 30 days 1.0%
31 - 60 days 1.5%
61 - 90 days 3.0%
91 - 120 days 10.0%
Over 120 days 50.0%
The allowance for bad debts account has a debit balance of P5,500 on December 31, 2018, before adjustment.

6. The company’s accounts receivable under 61-90 days category should be

a. P 32,600 c. P 44,600
b. P 44,320 d. P 42,000

7. The company’s accounts receivable under 91-120 days category should be

a. P 38,320 c. P 29,400
b. P 40,000 d. P 12,000

8. The allowance for bad debts to be reported in the statement of financial position at December 31, 2018 is
a. P 9,699 c. P 4,199
b. P 15,199 d. P 5,500

9. What is the net realizable value of accounts receivable at December 31, 2018?
a. P 165,641 c. P 196,039
b. P 171,141 d. P 186,340

The accounts receivable control account on December 31, 2016 of Argentina Company had a balance of P2,865,000. An analysis of
accounts receivable account showed the following:
Accounts known to be worthless P 37,500
Advance payments to creditors on purchase orders 150,000
Advances to affiliated companies 375,000
Customers’ accounts reporting credit balances because of sales returns (225,000)
Interest receivable on bonds 150,000
Other trade accounts receivable – unassigned 750,000
Subscriptions receivable from common stock due in 30 days 825,000
Trade accounts receivable – assigned (Argentina Company’s equity
in assigned accounts is P150,000) 375,000
Trade installment receivable due in 1-18 months, including unearned finance charges of P30,000 330,000
Trade receivables from officers due currently 22,500
Trade accounts on which post dated checks are held (no entries were made on receipts of checks) 75,000
Total P 2,865,000

10. How much is the total trade and other receivables presented as current assets as of December 31, 2016?
a. P 2,647,500 c. P 2,272,500
b. P 2,610,000 d. P 1,822,500

The following transactions affecting the accounts receivable of Sweden Co. took place during the year 2016:
Sales (cash and credit) P 600,000
Cash received from credit customer (P237,650 was received from customer who took advantage
of the discount feature of the company’s credit terms 3/10, n/30) 400,000
FAR 2: FLE 01 S.Y. 2022-2023, 2nd Semester jvacpa Page 3 of 4
 Cash received from cash customers 200,000
Accounts receivable written-off 5,000
Credit memoranda issued to credit customers for sales returns 25,000
Cash refunds given to cash customers for sales returns 15,000
Recoveries on accounts receivable written off as uncollectible in
prior periods (not included in cash collections above) 8,500

An aging of receivables indicate that P7,500 of the accounts receivable balance are deemed uncollectible.

The following were taken from the December 31, 2015, balance sheet: Accounts receivable, P90,000, Allowance for bad debts,
P1,400.

11. What is the accounts receivable ledger balance at December 31, 2016?
a. 60,000 c. 52,650
b. 61,150 d. 90,000
12. How much is the bad debts expense reported in the income statement for the year ended December 31, 2016?
a. 4,900 c. 7,500
b. 2,600 d. 11,100

Presented below are unaudited balances of selected accounts of Cy Company as of December 31, 2015:
DEBIT CREDIT
Cash P 500,000
Accounts receivable 1,300,000
Allowance for Uncollectible accounts P 8,000
Net sales 6,750,000

Additional information: Goods amounting to P50,000 were invoiced for the account of Clops Company for January 2, 2016 with terms
of net 60 days, FOB Shipping Point. The goods were shipped to Clops Company on December 31, 2015. The bank returned on
December 29, 2015, a customer’s check for P5,000 marked “No sufficient funds” but no entry was made.

13. What is the correct balance of accounts receivable at December 31, 2015?
a. 1,355,000 c. 1,305,000
b. 1,347,000 d. 1,350,000

Robert Company began operations on December 1, 2016 as a distributor of cellphone and tablet accessories. On December 18, 2016,
Robert sold merchandise costing P200,000 for P300,000 under the following terms: 2/10, n/30, FOB Destination and Freight Collect.
Freight amounted to P10,000. The merchandise was received by the buyer on December 26, 2016. On December 28, 2016, the buyer
paid the total amount due. What is the total amount received by Robert on December 28, 2016?

14. What is the total amount received by Robert on December 28, 2016?
a. P 284,000 c. P 290,000
b. P 300,000 d. P 284,200

On October 1, Kagome Inc. sold on account goods with a list price of P100,000 under the following terms: Trade discounts of 20%
and 10%; cash discounts of 2/10, n/30; FOB Shipping Point and Freight Prepaid. Freight amounted to P4,000. Kagome's policy is to
record accounts receivable and sales at net amount of cash discount.

15. What is the total amount received by Kagome on October 12?

a. P72,000 c. P74,560
b. P74,480 d. P76,000

FAR 2 – Conceptual Framework and Accounting Standards

FLE 01
Name: Course Year-Section: SCORE:

Theories
1. A 4. 7. 10. 13.
2. 5. 8. 11. 14.
3. 6. 9. 12. 15.

Problem
1. A 6. 11.
2. A 7. 12.
3. A 8. 13.

FAR 2: FLE 01 S.Y. 2022-2023, 2nd Semester jvacpa Page 4 of 4

4. A 9. 14.
5. 10. 15.

FAR 2: FLE 01 S.Y. 2022-2023, 2nd Semester jvacpa Page 5 of 4