1.

Accounts receivable of 540,000, after deducting the related allowance for doubtful
accounts. During 2020, the company had charges to bad debt expense of 90,000 and wrote off, as
uncollectible, accounts receivable of 40,000. What should the company report on its balance sheet
at December 31, 2020, as accounts receivable before the allowance for doubtful accounts?
a. 670,000
b. 590,000
c. 490,000
d. 440,000

2. During the year, Kiber Company made an entry to write off a 4,000 uncollectible account.
Before this entry was made, the balance in accounts receivable was 50,000 and the balance in the
allowance account was 4,500. The net realizable value of accounts receivable after the
write-off entry was
a. 50,000
b. 49,500
c. 41,500
d. 45,500

3. The following information is available for Slurpee Company:

Allowance for doubtful accounts at December 31, 2019 8,000

Credit sales during 2020 400,000
Accounts receivable deemed worthless and written off during 2020 9,000

As a result of a review and aging of accounts receivable in early January 2021, however, it has
been determined that an allowance for doubtful accounts of 5,500 is needed at December 31, 2020.
What amount should Slurpee record as "bad debt expense" for the year ended December 31, 2020?
a. 4,500
b. 5,500
c. 6,500
d. 13,500

4. Smith Corporation had a 1/1/20 balance in the Allowance for Doubtful Accounts of 10,000.
During 2020, it wrote off 7,200 of accounts and collected 2,100 on accounts previously written
off. The balance in Accounts Receivable was 200,000 at 1/1 and 240,000 at 12/31. At 12/31/20,
Smith estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt
Expense for 2020?
a. 2,000
b. 7,100
c. 9,200
d. 12,000

5. McGee Corporation had a 1/1/20 balance in the Allowance for Doubtful Accounts of 15,000.
During 2020, it wrote off 10,800 of accounts and collected 3,150 on accounts previously written
off. The balance in Accounts Receivable was 300,000 at 1/1 and 360,000 at 12/31. At 12/31/20,
McGee estimates that 5% of accounts receivable will prove to be uncollectible. What should
McGee report as its Allowance for Doubtful Accounts at 12/31/20?
a. 7,200
b. 7,350
c. 10,350
d. 18,000

6. On February 1, 2020, Henn Company factored receivables with a carrying amount of 300,000
to Agree Company. Agree Company assesses a finance charge of 3% of the receivables and retains
5% of the receivables. Relative to this transaction, you are to determine the amount of loss on sale
to be reported in the income statement of Henn Company for February.

Assume that Henn factors the receivables on a without recourse basis. The loss to be reported is
a. 0
b. 9,000
c. 15,000
d. 24,000

7. Williamson Corporation factored, with recourse, 300,000 of accounts receivable with

Husky Financing. The finance charge is 3%, and 5% was retained to cover sales
discounts, sales returns, and sales allowances. Williamson estimates the recourse obligation at
7,200. What amount should Williamson report as a loss on sale of receivables?
a. 0
b. 9,000
c. 16,200
d. 31,200

8. Lusty Company received a seven-year zero-interest-bearing note on February 22, 2020, in

exchange for property it sold to Port Company. There was no established exchange price for this
property and the note has no ready market. The prevailing rate of interest for a note of this type
was 7% on February 22, 2020, 7.5% on December 31, 2020, 7.7% on February 22, 2021, and 8%
on December 31, 2021. What interest rate should be used to calculate the interest revenue from
this transaction for the years ended December 31,
2020 and 2021, respectively?
a. 0% and 0%
b. 7% and 7%
c. 7% and 7.7%
d. 7.5% and 8%

9. On December 31, 2020, Clint Corporation sold for 75,000 an old machine having an original
cost of 135,000 and a book value of 60,000. The terms of the sale were as follows:
15,000 down payment
30,000 payable on December 31 each of the next two years
The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type
of transaction. What should be the amount of the notes receivable net of the unamortized discount
on December 31, 2020 rounded to the nearest Peso? (The present value of an ordinary annuity of
1 at 9% for 2 years is 1.75911.)
a. 52,773
b. 67,773
c. 60,000
d. 105,546

10. On January 1, 2020, Westly Co. exchanged equipment for a 400,000 zero-interest-bearing note
due on January 1, 2023. The prevailing rate of interest for a note of this type at January 1, 2020
was 10%. The present value of 1 at 10% for three periods is 0.75. What amount of interest revenue
should be included in Westly's 2021 income statement?
a. 0
b. 30,000
c. 33,000
d. 40,000

11. Ancop Inc.’ basis for doubtful accounts is based 5% of credit sales. Given the following data,
what will be the amount of the accounts written off as uncollectible?
Credit sales 15,000,000
Allowance for doubtful accounts 1/1/19 130,000
Allowance for doubtful accounts 12/31/19 225,000
Collection of accounts written off that was recovered 50,000
a. 705,000
b. 750,000
c. 725,000
d. 752,000

12. The following items were taken from Eye’s statement of financial position at December 31,
2019.
Debit Credit
Accounts Receivable 5,550,000
Allowance for doubtful accounts 65,000
Net credit sales 8,320,000

The doubtful accounts are 2% of accounts receivable. What will be the amount of the bad debt
expense to be reported for 2019?
a. 111,000
b. 46,000
c. 157,000
d. 101,400

13. On March 1, 2020, L.A Inc. factored receivables with a carrying of 4,000,000 to USA
Corporation. L.A assesses a finance charge of 2% of the receivables and retains 4% of the
receivables. If the factoring is treated as a loan agreement, what amount of loss should the company
recognize?
a. 80,000
b. 200,000
c. 280,000
d. 0

14. Howell received a one year, 425,000 note bearing annual interest of 9%. After four months,
Howell discounted the note at the bank at an effective interest rate of 12%. How much should
Howell receive from the bank?
a. 463,250
b. 476,000
c. 444,720
d. 461,720

15. On January 1, 2020, LLC company sold goods to FX company. FX company signed a
noninterest bearing note requiring payment of 800,000 for eight years. The first payment was made
on January 1,2020.
The prevailing rate of interest for this type of note at date of issuance was 10%.
PV of an ordinary annuity of 1 at 10% for 7 periods 4.87
PV of an ordinary annuity of 1 at 10% for 8 periods 5.33
What is the carrying amount of the note receivable on January 1, 2020?
a. 3,896,000
b. 3,000,000
c. 4,264,000
d. 4,000,000

16. Jahaziel Company provided the following information relating to accounts receivable for the
current year:

Accounts receivable on January 1 1,000,000

Credit Sales 4,000,000
Collections from customers, excluding recovery 3,000,000
Accounts written off 300,000
Collection of accounts receivable written off in 40,000
prior year (customer credit was not
reestablished)
Estimated uncollectible receivables per aging of 130,000
receivables at December 31

What is the amount of accounts receivable, before allowance for doubtful accounts on December
31?
a. 5,000,000
b. 3,300,000
c. 8,300,000
d. 1,700,000
17. Speak Now Company provided the following data relating to accounts receivable for the
current year:
Accounts receivable – January 1 800,000
Credit Sales 3,500,000
Sales returns 60,000
Accounts written off 30,000
Collections from customers 3,000,000
Estimated future sales returns at December 31 40,000
Estimated uncollectible accounts at 12/31 per 95,000
aging

What is the accounts receivable balance on December 31?

a. 4,300,000
b. 1,210,000
c. 3,090,000
d. 3,500,000

18. At year-end, RED Company reported that the current receivables consisted of the following:
Trade accounts receivable 1,000,000
Allowance for uncollectible accounts (50,000)
Claim against shipper for goods lost in transit in 25,000
November
Selling price of unsold goods sent by RED on
consignment at 130% of cost and not included in RED’s
ending inventory 275,000
Security deposit on lease of warehouse used for storing
some inventories 400,000
Total 1,650,000

What total amount should be reported as trade and other receivables under current assets at year
end?
a. 1,250,000
b. 700,000
c. 975,000
d. 1,100,000

19. ME! Company provided the following information during the first year of operations:
Total merchandise purchases for the year 8,000,000
Merchandise inventory on December 31 2,000,000
Collections from customers 5,000,000

All merchandise was marked to sell at 50% above cost. All sales are on a credit basis and all
receivables are collectible. What is the balance of accounts receivable on December 31?
a. 4,000,000
b. 6,000,000
c. 12,000,000
d. 9,000,000

20. Delicate Company provided the following information relating to current operations:
Accounts receivable, January 1 5,000,000
Accounts receivable collected 9,400,000
Cash sales 3,000,000
Inventory, January 1 5,800,000
Inventory, December 31 5,400,000
Purchases 9,000,000
Gross margin on sales 5,200,000

What is the balance of accounts receivable on December 31?

a. 9,400,000
b. 7,200,000
c. 14,800,000
d. 16,600,000

21. SM Entertainment provided the following information during the first year operations:
Total merchandise purchases for the year 10,000,000
Merchandise inventory on December 31 2,500,000
Collections from customers 5,000,000

All merchandise was marked to sell at 40% above cost. All sales are on a credit basis and all
receivables are collectible. What is the balance of accounts receivable on December 31?
a. 4,700,000
b. 5,500,000
c. 15,500,000
d. 5,000,000

22. At year-end, SNSD Company reported that the current receivables consisted of the following:
Trade accounts receivable 840,000
Allowance for uncollectible accounts (30,000)
Claim against shipper for goods lost in transit in November 40,000
Selling price of unsold goods sent by SNSD on consignment
at 130% of cost and not included in SNSD’s ending inventory 170,000
Security deposit on lease of warehouse used for storing some
inventories 200,000
Total 1,220,000

What total amount should be reported as trade and other receivables under current assets at year-
end?
a. 980,770
b. 1,071,000
c. 850,000
d. 871,000
23. At the end of its first year of operations, December 31, 2020, Tiffany Inc. reported the
following information:
Accounts receivable, net of allowance for doubtful accounts 6,700,000
Customer accounts written off as uncollectible during 2020 140,000
Bad debts expense for 2020 640,000

What should be the balance in accounts receivable at December 31, 2020 before subtracting the
allowance for doubtful accounts?
a. 7,200,000
b. 6,060,000
c. 5,860,000
d. 5,920,000

24. The following accounts were taken from Sone Inc.’s statement of financial position at
December 31, 2020.
Debit Credit
Accounts receivable 9,300,000
Allowance for doubtful accounts 300,000
Net credit sales 12,500,000

If doubtful accounts are 5% of accounts receivable, determine the bad debt expense to be reported
for 2020.
a. 2,900,000
b. 1,090,000
c. 765,000
d. 1,065,000

25. TTS Company has a 9% notes receivable dated June 30, 2018, in the original amount of
3,600,000. Payments of 400,000 in principal plus accrued interest are due annually on July 1, 2019,
2020 and 2021.

25.1 What is the balance of notes receivable on July 1, 2019?

a. 2,800,000
b. 2,400,000
c. 3,000,000
d. 3,200,000

25.2 In the June 30,2020 statement of financial position, what amount should be reported as a
current asset for interest on the note receivable?
a. 270,000
b. 288,000
c. 252,000
d. 216,000

26. On June 1, 80,000 of goods are sold with credit terms of 1/10, n/30. How much should the
seller expect to receive if the buyer pays on June 8?
a. 72,000
b. 78,400
c. 79,200
d. 80,000

27. On June 1, 800 of goods are sold with credit terms of 2/10, n/30. On June 3 the customer
returned 100 of the goods. How much should the seller expect to receive if the buyer pays on June
8?
a. 68,400
b. 68,600
c. 69,300
d. 79,200

28. A company estimates that 20,000 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 Credit of __________ to the Allowance for Doubtful Accounts.
a. 24,000
b. 12,000
c. 28,000
d. 14,000

29. With credit terms of 2/10, n/30, the annual interest rate for paying in 10 days instead of 30 days
is closest to
a. 2%
b. 24%
c. 30%
d. 36%

30. A company estimates that 20,000 of its 500,000 of accounts receivable will be uncollectible.
Its Allowance for Doubtful Accounts presently has a credit balance of 18,000. The adjusting entry
will include a __________to Bad Debts Expense.
a. Debit of 2,000
b. Credit of 2,000
c. Debit of 38,000
d. Credit of 38,000

31. Ryce Company uses the allowance method of accounting for uncollectible accounts. During
2010, Ryce had charged 800,000 to bad debt expense, and wrote off accounts receivable 900,000
as uncollectible. What was the decrease in working capital as a result of these entries?
a. 900,000
b. 800,000
c. 100,000
d. 0

32. Yana Company factored 6,000,000 of accounts receivable to a finance entity on October 1,
2019. Control was surrendered by Yana Company. The factor assessed a fee of 3% and retains a
holdback equal to 5% of the accounts receivable. In addition, the factor charged 15% interest
computed on a weighted average time to maturity of the accounts receivable of 54 days. What is
the amount of cash initially received by Yana Company from the factoring?
a. 5,296,850
b. 5,386,850
c.. 5,476,850
d. 5,556,850

33. Pia Company received from a customer a one-year, 500,000 note bearing annual interest of
8%. After holding the note for six months, Pia discounted the note without recourse at Security
Bank at an effective interest rate of 10%. What amount of cash did Pia receive from the bank?
a. 540,000
b. 523,810
c. 513,000
d. 495,238

34. Simon Company has an 8% bite receivable dated June 30,2019, in the original amount of
1,500,000. Payments of 500,000 in principal plus accrued interest are due annually on July 1, 2020,
2021,2022. In its June 30,2021 statement of financial position, what amount should Simon report
as a current asset for interest on the note receivable?
a. 120,000
b. 40,000
c. 80,000
d. 0

35. On July 1, 2019, Almond Company sold goods in exchange for 2,000,000, 8-month non-
interest bearing note receivable. At the time of the sale, the note’s market rate of interest was 12%.
What is the amount did Almond receive when it discounted the note at 10% on September 1, 2019?
a. 1,940,000
b. 1,938,000
c. 1,900,000
d. 1,880,000

36. On January 1, 2018, St. Marc Café Company sold a land that originally cost 400,000 to
Coffee Company. As payment Coffee gave 600,000 note. The note bears an interest rate of 4%
and is to be repaid in the three annual installments of 200,000 (plus interest on the outstanding
balance). The first payment is due on December 31, 2018. The market price of the land is not
readily determinable. The prevailing rate of interest for note of this type is 14% on January 1,
2018 and 15% on December 31, 2018. You made an inspection of the books and the entries
made by the client and noted the following:
January 1, 2018:
Notes receivable 600,000
Land 400,000
Gain on the sale of land 200,000
 December 31, 2018:
Cash 224,000
Notes receivable 200,000
Interest income 24,000

St. Marc Café reported the notes receivable in its statement of financial position at December 31,
2018 as part of trade and other receivables.

Based on the result of your audit, answer the following:

1. Correct gain on sale of land?
a. 111,023 b. 103,090 c. 104,182 d. 105,821

2. Correct interest income?

a. 71,352 b. 48,933 c. 25,543 d. 70,432

3. Overstatement of profit?
a. 50,477 b. 70,433 c. 60,126 d. 52,196

4. Correct carrying amount of notes receivable?

a. 350,000 b. 334,829 c. 351,293 d. 349,523

37. The December 31, 2017 statement of Financial position of Seattle’s Best Coffee Company
showed Accounts receivable balance of 500,000 and Allowance for Bad Debts of 48,000.
Following is a summary of accounts receivable transactions recorded by the company in 2018:
Credit sales during the year 3,120,000
Total accounts collected during the year 3,020,160
Accounts written off as uncollectible 42,000
Recoveries of accounts written off in the previous year 2,160
On December 31, 2018, an aging of accounts receivable indicated the following:
Age Group % of Total Receivable Probability of
Amount Collection
Less than 60 days 60% 99
Between 61 and 120 days 22 88
Between 121 and 180 days 15 45
Over 180 days 3 20

Based on the above and the result of your audit, answer the following:
1. The adjusted gross balance of accounts receivable is?
a. 560,000 b. 562,160 c. 570,000 d. 604,160

2. The allowance for doubtful accounts as of December 31, 2018 is:

a. 77,484 b. 77,324 c. 77,784 d. 77,544

3. The doubtful account expense for the year 2018 is:

a. 69,324 b. 69,624 c. 69,664 d. 69,124
 4. The net realizable value of accounts receivable as of December 31, 2018 is:
a. 480,356 b. 480,516 c. 482,456 d. 482,216

5. Assuming that the over 180 days’ account is 100% uncollectible, how much is the
balance of allowance for uncollectible accounts at year end?
a. 43,244 b. 64,344 c. 44,684 d. 58,924

For Numbers 38, 39 and 40

An entity provided the following information at year-end:
2020 2019
Accounts receivable 880,000 800,000
Allowance for doubtful accounts ( 10,000) ( 15,000)
Allowance for products returns ( 20,000) ( 25,000)
Net realizable value 850,000 760,000
The entity reported debt expense in 2020 of 30,000 and had products returned for credits totaling
15,000 at sales price. Gross sales for 2020 amounted to 6,150,000

38. What amount of accounts receivable was written during 2020?

a. 35,000
b. 30,000
c. 15,000
d. 10,000

39. What amount was collected from customers during 2020?

a. 6,035,000
b. 6,070,000
c. 6,020,000
d. 6,100,000

40. What amount was reported as net sales for 2020?

a. 6,150,000
b. 6,140,000
c. 6,100,000
d. 6,135,000

41. LDS Company has the following account balances for the year ended December 31, 2018:
Accounts Receivable 60,000
Allowance for Doubtful Accounts 3,600
Sales Discounts 2,400
LDS Company should report accounts receivable at the amount of
a. 54,000
b. 56,400
c. 57,600
d. 60,000
42. Dae Co. has outstanding accounts receivable totaling 6,500,000 as of December 31,2019 and
sales on credit of 15,000,000. There is also a debit balance of 12,000 on Allowance for Doubtful
Accounts. If the company estimates that 8% of its outstanding receivables were uncollectible,
what will be the balance in Allowance for Doubtful Accounts after the year-end adjustment to
record bad debt expense?
a. 1,200,000
b. 228,000
c. 240,000
d. 252,000

43. Allowance for Doubtful Accounts has a debit balance of 1,000 at the end of the year before
adjustment, and uncollectible accounts expense is estimated at 2% of net sales. If net sales are
600,000, the amount of the adjusting entry to record the provision for doubtful accounts is:
a. 1,000
b. 13,000
c. 11,000
d. 12,000

44. On the December 31, 2011, the Receivables” account of Mavis Company sows an amortized
cost of Php. 1,950,000. Subsidiary details show the following:
Trade accounts receivable 774,000
Trade notes receivable 100,000
Installments receivable, normally due 1 to 2 years 300,000
Customers’ accounts reporting credit balance 30,000
Advance payments for purchase of merchandise 150,000
Advance payments from customers 20,000
Cash advances to subsidiary 400,000
Claims from Insurance Company 15,000
Subscription receivables due in 60 days 300,000
Accrued interest receivable 10,000

How much should be presented as “trade and other receivables” under current assets?
a. Php. 725,000 b. Php. 1,125,000
c. Php. 1,290,000 d. Php. 1,650,000

45. The following information relates to Heartfilia Co.’s accounts receivable for 2011:

Accounts receivable, January 1, 2011 976,000

Credit sales 4,050,000
Sales returns 112,000
Impairment of receivables 60,000
Collections from customers 3.325,000
Estimated future sales returns 75,000
Estimated sales discounts 25,000
What amount should Heartfilia Co. report as accounts receivable at December 31, 2011 statement
of financial position?
a. Php. 1,527,500 b. Php. 1,627,500
c. Php. 1,567,200 d. Php. 1,800,000

46. On May 31, 2012, Fullbuster Co. had a total accounts receivable of Php.1,056,000.
Presented below is the analysis of the age, the peso amount of the receivable according to their age
and percent of uncollectible based on observable data leading to the recognition expense related
to the receivable:
Age Amount Estimated Uncollectible
0-30 days Php. 960,000 5%
31-60 days Php. 64,000 10%
Over 60 days Php. 32,000 Php. 22,400

What amount should Fullbuster Co. report as expense related to the accounts receivable in its fiscal
year ending May 31, 2012 statement of comprehensive income?
a. Php. 48,000 b. Php. 60,800
c. Php. 64,000 d. Php. 76,800

For items 4 to 5 Refer to the following information. On December 28, 2013, Natsu Inc.’s sells a
loan to Redfox Finance Co. for Php. 490,000. The carrying value of the loan portfolio is Php.
500,000 on the date of sale. Immediately, Natsu Inc. purchased a call option to repurchase the loan
portfolio.

47. Assuming that call option is deep out the money, what amount of financial asset 9loans) should
Natsu Inc. continue to recognize and report in its December 31, 2013 balance sheet?
a. None b. Php. 10,000
c. Php .490,000 d. Php. 500,000

48. Assuming that call option is deep in the money, what amount of financial asset 9loans) should
Natsu Inc. continue to recognize and report in its December 31, 2013 balance sheet?
a. None b. Php. 10,000
c. Php .490,000 d. Php. 500,000