Accounts Receivable

Problems

1. Roxy Company provided the following information relating to accounts receivable for the current
year:
Accounts receivable, January 1 1,300,000
Credit sales 5,400,000
Collections from customer, excluding recovery 4,750,000
Accounts written of 125,000
Collections of accounts written of in prior year
(customer credit was not re-established) 25,000
Estimated uncollectible receivables per aging
of receivables at December 31 165,000

What is the balance of accounts receivable, before allowance for doubtful accounts on December 31?
a. 1,825,000 c. 1,950,000
b. 1,850,000 d. 1,990,000

2. Jay Company provided the following data relating to accounts receivable for the current year:
Accounts receivable, January 1 650,000
Credit sales 2,700,000
Sales returns 75,000
Accounts written of 40,000
Collections from customers 2,150,000
Estimated future sales returns at December 31 50,000
Estimated uncollectible accounts at 12/31 per aging 110,000
What is the amortized cost of accounts receivable on December 31?
a. 1,200,000 c. 1,085,000
b. 1,125,000 d. 925,000

3. Steven Company provided the following information during the first year of operations:
Total merchandise purchases for the year 7,000,000
Merchandise inventory on December 31 1,400,000
Collections from customers 4,000,000

All merchandise was marked to sell at 40% above cost. All sales are on credit basis and all receivables are
collectible.
What is the balance of accounts receivable on December 31?
a. 1,000,000 c. 5,000,000
b. 3,840,000 d. 5,800,000

4. Wonder Company provided the following transactions afecting accounts receivable during the current
year:
Sales- cash and credit 5,900,000
Cash received from credit customers, all of whom
took advantages of the discount feature of the
credit terms 4/10, n/30 3,024,000
Cash received from cash customers 2,100,000
Accounts written of as worthless 50,000
Credit memorandum issued to credit customers
for sales returns and allowances 250,000
Cash refunds given to cash customers for sales returns
and allowances 20,000
Recoveries on accounts receivable written of an
Uncollectible in prior periods not included in
Cash received from customers stated above 80,000

Balances on January 1
Accounts receivable 950,000
Allowance for doubtful accounts 100,000
The entity provided for uncollectible account losses by crediting allowance for doubtful accounts in the
amount of P70,000 for the current yer.
What is the balance of allowance for doubtful accounts on December 31?
a. 120,000 c. 250,000
b. 200,000 d. 170,000

5. German Company started business at the beginning of current year. The entity established an
allowance for doubtful accounts estimated at 5% of credit sales. During the year, the entity wrote of
P50,000 of uncollectible accounts.
What is the cost of goods sold?
a. 7,500,000 c. 3,600,000
b. 5,400,000 d. 6,900,000

6. Orr Company prepared an aging of accounts receivable on December 31 and determined that the net
realizable value of the accounts receivable was 2,500,000.

Allowance for doubtful accounts on January 1 280,000

Accounts written of as uncollectible 230,000
Accounts receivable on December 31 2,700,000
Uncollectible accounts recovery 50,000

What amount should be recognized as doubtful accounts expense for the current year?
a. 230,000
b. 200,000
c. 150,000
d. 100,000

7. Tara Company provided the following information pertaining to account receivable at year end:

Days Estimated Estimated

Outstanding Amount uncollectible
0-60 1,200,000 1%
61-120 900,000 2%
Over 120 1,000,000 60,000
3,100,000
During the current year the entity wrote of 70,000 in account receivable and recovered 40,000 that had
been written of in prior years.
At the beginning of current year the allowance for uncollectible account was 100,000
Under the aging method what amount of allowance for uncollectible account should be reported at year
end?
a.190,000
b. 100,000
c. 130,000
d. 90,000

8. Manchester Company provided the following account abstracted from the unadjusted trail balance at
year end:

Debit Credit
Account receivable 5,000,000
Allowance for doubtful accounts 40,000
Net credit sales 2,000,000

The entity estimated that 3% of the gross accounts receivable will become uncollectible.
What amount should be recognized as doubtful accounts expenses for the current year?
a. 110,000
b. 150,000
c. 190,000
d. 600,000

9. At the beginning of current year Jamin Company had a credit balance of 260,000 in the allowance for
uncollectible accounts. Based on past experience 2% of credit sales would be uncollectible.

During the current year the entity wrote of 325,000 of uncollectible accounts. Credit sales for the year
totalled 9,000,000.

What amount should be reported as allowance for uncollectible account at year end?
a. 115,000
b. 180,000
c. 245,000
d. 440,000

10. 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 discount 200,000
Accounts written of as uncollectible 200,000

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

Investments
Problem

1. During 2018 Lawan Company bought the shares of Burwood Company.

June 1 20,000 shares @ 100 2,000,000

December 1 30,000 shares @ 120 3,600,000

Transactions for 2019

January 10 Received 20% share dividend.
July 20 Received cash dividend of 10 per shares
December 10 Sold 30,000 shares at 215 per share.

What is the gain on the sales of shares under FIFO approach?

a. 1,150,000
b. 950,000
c. 150,000
d. 550,000

2. Wray Company provided the following data for the current year:

On September 1 Wry received a 500,000 cash dividend from Seco Company in which Wray owns
a 30% interest.
On October 1 Wray received a 60,000 liquidating dividend form King Company Wray owns 5%
interest in King
Wray owns a 10% interest in Bow Company which declared and paid 2,000,000 cash dividend on
November 15.

What amount should be reported as dividend income for the current year?
a. 700,000
b. 560,000
c. 500,000
d. 200,000

3. During the current year Neil Company held 30,000 shares of Brock Company’s 100,000 outstanding
shares and 6,000 shares of Amal Company’s 300,000 outstanding shares. During the year Neil received
300,000 cash dividend from Brock 15,000 cash dividend and 10% share dividend from Amal. The closing
price of Amal shares is 150.

What amount should be reported as dividend revenue for the current year?
a. 342,000
b. 315,000
c. 442,000
d. 15,000

4. Adam Company owned 50,000 ordinary shares of Bland Company. These 50,000 shares were
purchased by Adam for 120 per shares.
On August 30, Bland distributed 50,000 shares rights to Adam. Adam was entitled to buy one new shares
of Bland Company for 90 cash and two of these rights
On August 30 each share had a market value of 130 and each right had a market value of 20

What total cost should be recorded for the new shares that are acquired by exercising the rights?
a. 2,250,000
b. 3,250,000
c. 3,050,000
d. 5,500,000
5. At the beginning of current year Well Company purchased 10% of Rea Company outstanding ordinary
shares for 4,000,000.
Well Company is the largest single shareholder in Rea and Wells officers are a majority of Rea board of
directors.
The investee reported net income of 5,000,000 for the current year and paid cash dividend of 1,500,000.

What amount should be reported as investment in Rea Company at year end?

a. 4,500,000
b. 4,350,000
c. 4,000,000
d. 3,850,000

6. On Jul 1, 2018 Denver Company purchased 30,000 shares of Eagle company’s 100,000 outstanding
ordinary shares for 200 per share. On December 15, 2018 the investee paid 400,000 in cash dividend to
the ordinary shareholders.
The investee’s net income for the year ended December 31, 2018 was 1,200,000 earned evenly
throughout the year.

What amount of income from the investment should be reported in 2018?

a. 360,000
b. 180,000
c. 120,000
d. 60,000

7. On April 1, 2018 Ben Company purchased 40% of the outstanding ordinary shares of Clarke Company
for 10,000,000.
On that date Clarke’s net assets were 20,000,000 and Ben cannot attribute the excess of the cost of its
investment in Clarke over its equity in Clarke’s ne assets to any particular factor. The investee’s net
income for 2018 is 5,000,000

What is the maximum amount which could be included in 2018 income before tax to reflect the equity in
net income of investee?
a. 1,400,000
b. 1,500,000
c. 2,000,000
d. 1,850,000

8. At the beginning of current year Kean Company purchased 30% interest in Pod Company for
2,500,000.
On this date Pod’s shareholder equity was 5,000,000. The carrying amounts of Pod’s indentifiable net
assets approximated their fair value except for land whose fair value exceeded the carrying amount
2,000,000.
The investee reported net income of 1,000,000 and paid no dividends during the current year.

What amount should be reported as investment in associate at year end?

a. 2,100,000
b. 2,200,000
c. 2,800,000
d. 2,760,000
9. At the beginning of current year Bing Company purchased 30,000 shares of Latt Company’s 200,000
outstanding ordinary shares for 6,000,000. On that date the carrying amount of the acquired shares on
Latt’s books 4,000,000.
Bing attributed the excess of cost over carrying amount to patent.
The patent has a remaining useful life of 10 years.
During the current year Bing’s officers gained a majority on Latt’s board of directors.
Latt Company reported earnings of 5,000,000 for the current year and declared and paid dividend of
3,000,000 at year end

What is the carrying amount of the investment in associate at year end?

a. 6,000,000
b. 6,100,000
c. 6,300,000
d. 6,750,000

10. On July1, 2018 Miller Company purchased 25% of Wall Company outstanding ordinary shares and no
good will resulted from the purchase.
Miller appropriately carried this investment at equity and the balance in Miller investment account was
1,900,000 on December 31, 2018.
Wall Company reported net income of 1,200,000 for the year ended December 31, 2018 and paid cash
dividend totaling 480,000 on Decemer 31, 2018

How much did Miller pay for the 25% interest in Wall?
a. 1,720,000
b. 2.020,000
c. 1,870,000
d. 2,170,000

Inventory
Problem

1. Corolla Company incurred the following costs:

Materials 700,000
Storage cost of finished goods 180,000
Delivery to customers 40,000
Irrecoverable purchase taxes 60,000

At what amount should the inventory be measured?

a. 880,000
b. 760,000
c. 980,000
d. 940,000

2. Stone Company had the following transactions during December:

Inventory shipped on consignment to Beta Company 1,800,000
Freight paid by Stone 90,000
Inventory received on consignment from Alpha Company 1,200,000
Freight paid by Alpha 50,000
No sales of consigned goods were made in December.

What amount should be included in inventory on December 31?

a. 1,200,000
b. 1,250,000
c. 1,800,000
d. 1,890,000

3. On October 1, 2018 Grimm Company consigned 40 freezers to Holden Company costing 14,000 each
for sales at 20,000 each and paid 16,000 in transportation costs.
On December 30, 2018 Holden Company reported the sale of 10 freezers and remitted 170,000. The
remittance was net of the agreed 15% commission.

What amount should be recorded as consignment sales revenue for 2018?

a. 154,000
b. 170,000
c. 196,000
d. 200,000

4. On December 1, 2018 Alt Department Store received 505 sweaters on consignment from Todd. Todd’s
cost for the sweaters was 800 each and they were price to sell at 1,000.
Alt commission on consigned goods is 10%. On December 31, 218 5 sweater remained.

On December 31, 2018 what amount should be reported as payable for consigned goods?
a. 490,000
b. 454,000
c. 450,000
d. 404,000

5. Harris Company provided the following information for an inventory at year end:

Historical cost 1,200,000

Estimated selling price 1,300,000
Estimated completion and selling cost 150,000
Replacement cost 1,100,000

What amount should be reported as inventory at year end?

a. 1,100,000
b. 1,150,000
c. 1,200,000
d. 1,300,000

6. Aloha Company determined the following information for an inventory at year end:

Historical cost 2,000,000

Current replacement cost 1,400,000
Net realizable value 1,800,000
Net realizable value less a normal profit margin 1,700,000
Fair Value 1,900,000

What amount should be reported as inventory at year end?

a. 1,400,000
b. 1,700,000
c. 1,800,000
d. 1,900,000

7. Lin Company sold merchandise at gross profit of 30%. On June 30, all of the inventory was destroyed
by fire.
The entity provided the following information for the six months ended June 30:

Net sales 8,000,000

Beginning inventory 2,000,000
Net purchases 5,200,000

What is the estimated cost of the destroyed inventory?

a. 4,800,000
b. 2,800,000
c. 1,600,000
d. 800,000

8. Gecelle Company reported during the current year:

Beginning inventory 500,000

Net purchases 2,500,000
Net sales 3,200,000
A physical count at year end resulted in an inventory of 575,000. The gross profit on sales had remained
constant at 25%.
The entity suspected that some inventory may have been taken by a new employee.

What is the estimated cost of missing inventory at year end?

a. 100,000
b. 175,000
c. 225,000
d. 25,000

9. At year end Pamela Company reported that a flood caused severe damage to the entire inventory.
Based on recent history the entity had a gross profit of 25% of sales.
The entity provided the following information for the current year:

Inventory, January 1 500,000

Purchases 4,000,000
Purchase return 200,000
Sales 5,600,000
Sales return 400,000
Sales allowance 100,000

What is the cost of ending inventory damaged by flood?

a. 475,000
b. 400,000
c. 260,000
d. 220,000

10. At year end Empress Company had a fire which completely destroyed the goods in process inventory.
Physical inventory was taken after the fire.
The raw materials were valued 600,000 the finished goods at 1,000,000 and factory supplies at 100,000
at year end.
The beginning inventories consisted of the following:
Finished goods 1,400,000
Goods in process 1,000,000
Raw materials 300,000
Factory supplies 400,000

Data for the current year

Sales 3,000,000
Purchases 1,000,000
Freight in 100,000
Direct labor 800,000
Manufacturing overhead – 50% of direct labor ?
Average gross profit rate on sales 30%

What is the cost of goods manufactured?

a. 2,500,000
b. 1,700,000
c. 3,100,000
d. 2,300,000