Accounts Receivable Quizzer

1.

Which of the following is classified as a financial asset? a. Ordinary shares of the issuer c. Accounts receivable b. Loans payable by the borrower d. Inventory

2.

Statement I: Trade receivables are classified as current assets if they are to be collected within one year or within the normal operating cycle, whichever is shorter. Statement II: Non-trade receivables are classified as current assets if they are to be collected within one year or within the normal operating cycle, whichever is longer. a. Both statements are true c. Only statement I is true b. Both statements are false d. Only statement I is false

3.

Which of the following items is a trade receivable? a. Claims in litigation c. Amounts due from customers b. Loans to employees d. Receivables from affiliates

4.

The operating cycle a. Cannot exceed a period of one year b. Refers to the seasonal variations experienced by business entities c. Should be used to classify asset and liabilities as current if the cycle is less than one year d. Measures the time elapsed between cash disbursement for inventory and cash collection of the sales price

5.

On the balance sheet date, accounts receivable are generally reported at a. Pawn value c. Maturity value b. Net realizable value d. Market value

6.

Receivables denominated in foreign currency should be translated to foreign currency at a. Closing rate c. Historical rate b. Average rate d. Mortality rate

7.

8.

9.

A credit balance in accounts receivable resulting from overpayments, advanced payments and sales returns should be classified as (CUSTOMERS’ CREDIT BALANCE) a. A current liability c. A contra asset b. A long-term liability d. A note disclosure When a note receivable is dishonored, it is debited to a. Accounts receivable at face value b. Accounts receivable at face value plus interest and other charges c. Dishonored note receivable at face value d. Dishonored note receivable at face value plus interest and other charges Statement I: Interest bearing long-term notes shall be stated at face value Statement II: Non-interest bearing long-term notes shall be stated at face value Statement III: Short-term notes; interest bearing or non-interest bearing, are stated at face value. a. Statements I, II and III are true c. Only statement II is false b. Only statement I is true d. Only statement III is false

10. On the basis of substance over form, the interest on the non-interest bearing note is equal to a. Zero b. The excess of the face value over the present value c. The excess of the present value over the face value d. The excess of the market value over the face value 11. Uncollectible account expense: a. Should not occur if a company properly investigates customers based on credit history b. Is the amount an entity must pay whenever a customer fails to pay his or her account c. Is the amount an entity must pay to a collection agent to recover amounts on overdue accounts d. Represents the loss in accounts receivable that eventually turn out to be uncollectible 12. A method of estimating uncollectible accounts that emphasizes asset valuation rather than income measurement is the allowance method based on a. Aging of receivables c. Gross credit sales b. Direct write-off d. Net credit sales 13. The advantage of relating bad debt expense to accounts receivable is that this approach a. Does not require knowledge of the balance in the allowance for doubtful accounts b. Gives a reasonably correct amount of receivables in the balance sheet c. Does not require estimates of uncollectible accounts d. Relates bad debt expense to the period of sale 14. Which method of recording bad debt loss is consistent with accrual accounting? a. Allowance method c. Percentage of sales method b. Direct write-off method d. Percent of accounts receivable method 15. Under the allowance method, the entry to recognize bad debt expense a. Increases net income c. Has no effect on current assets b. Decreases current assets d. Has no effect on net income 16. Under the allowance method, the allowance for doubtful accounts will decrease when a. Specific account receivable is collected b. Account previously written off is collected c. Specific uncollectible account is written off d. Account previously written off becomes collectible 17. Under the allowance method, the entry to record the write-off of a specific account will a. Decrease both accounts receivable and net income b. Increase the allowance for doubtful accounts and decrease the net income c. Decrease both accounts receivable and the allowance for doubtful accounts d. Decrease accounts receivable and increase the allowance for doubtful account

18. Under the allowance method, entries at the time of collection of an account previously written off would a. Increase net income b. Have no effect on net income c. Decrease the allowance for doubtful accounts d. Have no effect on the allowance for doubtful accounts 19. Under the direct write-off method, uncollectible accounts expense is recognized a. As a percentage of net sales during the period b. As a percentage of net credit sales during the period c. As indicated by aging the accounts receivable at the end of the period d. As specific accounts receivable are determined to be worthless 20. For banks and financial institutions, receivables arise primarily from a. Loans c. Withdrawals b. Deposits d. Credit Sales 21. Under PAS 39, loans and receivables are financial assets with fixed or determinable amounts that are a. Derivative, quoted c. Non-derivative, quoted b. Derivative, non-quoted d. Non-derivative, non-quoted 22. Under PAS 39, loans and receivables are initially measured at

Nonoy elected to estimate its doubtful accounts by using percent of accounts receivable method. Nonoy determined that 6% would be a good estimate. There were no write offs nor recoveries during the year. What amount should be reported as doubtful accounts expense in the current year as a result of this change? 26. Maple Company provides for doubtful accounts expense at the rate of 3 percent of net credit sales. Maple’s credit terms are 2/10, n/30. The following data are available for the current year: Accounts written off as uncollectible during the year Collection from customers beyond discount period (Including recovered accounts of 15,000) Credit sales, year-ended December 31 Sales returns and allowances Collection from customers within discount period Allowance for doubtful accounts, January 1 Accounts receivable, January 1

60,000 1,500,000 3,300,000 200,000 882,000 54,000 950,000

What is the net realizable value of the accounts receivable at December 31? 27. Vivian Company had net sales in 2011 of P700, 000. At December31, 2011, before adjusting entries, the balances in selected accounts were: accounts receivable P125, 000 debit, and allowance for doubtful accounts P1,200 debit. Vivian estimates that 2% of its accounts receivable will prove to be uncollectable. What is the cash realizable value of the receivables reported on the statement of financial position at December31, 2011?

23. Under PAS 39, loans and receivables are measured on the balance sheet date at 28. Sally Company builds and sells equipment used in manufacturing pharmaceuticals. On December 31, 2011, the entity reported accounts receivable as follows: 24. Vanessa Company uses the allowance method. The following schedule was prepared from an aging of accounts receivable outstanding on December 31,2011: 0-30 days 31-60 days Over 60 days

5,000,000 2,000,000 1,000,000

.98 collectible .90 collectible .80 collectible

Net credit sales for the year Allowance for doubtful accounts: Balance, January 1, 2011 – credit balance Balance before adjustment, December 31, 2011 –debit balance

40,000,000 450,000 20,000

Finley Company Rios, Inc. Rafael Co. Hunter, Inc, All other receivables

80, 000 200, 000 120, 000 100, 000 500, 000

The entity determines that Finley Company’s receivable is impaired by P40, 000 and Hunter’s receivable is totally impaired. The other receivables from Rafael and Rios are not considered impaired. The entity determines that a composite rate of 2% is appropriate to measure impairment on all other receivables. What is the total impairment of receivables for 2011?

What amount should be recognized as doubtful accounts expense for 2011? 29. The current receivables of Jenine Company on December 31, 2011 consisted of the ff: 25. Nonoy Company reported the following data at the end of the current year: Accounts receivable Credit sales Doubtful accounts expense (2% of the credit sales) Allowance for doubtful accounts – January 1

6,000,000 12,000,000 240,000 50,000

Trade accounts receivable Allowance for uncollectible accounts Claim against shipper for goods lost in transit in November 2011 Selling price of unsold goods sent by Jenine in consignment at 130% of cost and not include in Jenine’s ending inventory Security deposit on lease of warehouse used for storing inventories

93, 000 2, 000 3, 000 26, 000 30, 000

What is the correct total of current net receivables on December 31, 2011? 30. On December31, 2011, Analyn Company received two P2, 000, 000 notes receivable from customers in exchange for services rendered. On both noted, interest is calculated on the outstanding principal balance at the annual rate of 3% and payable at maturity. The first note, made under customary trade terms is due in nine months and the second note is due in five years. The market interest rate for similar notes on December 31, 2011 was 8%. The PV of 1 at 8% due in nine months is 944 and the PV of 1 at 8% due in 5 years is 68. On December 31, 2011, what carrying amount should be reported for the two notes receivable? 31. Jerwin Bank grants a 10-year loan to a borrower n the amount of P150, 000 with stated interest rate of 6%. Payments are due monthly and are computed to be P1, 665. Jerwin Bank incurred P4, 000 of direct loan origination cost and P2, 000 of indirect loan origination cost. In addition, Jerwin Bank charged the borrower a 4-point nonrefundable loan origination fee. What carrying amount of the loan receivable should be reported initially by Jerwin Bank?

addition, the amount of principal repayment will be dropped from P 200,000 to P100,000. The prevailing interest rate for similar type of the loan as of December 31, 2009 is 10%. The loan impairment loss to be recognize in 2009 profit or loss is 37. Roxy Company had the following information relating to its account receivable: Accounts receivable at 12/31/2008 Credit sales for 2009 Collection from customers for 2009, excluding recovery Accounts written off 9/30/2009 Collection of accounts written off in prior year (customer credit was not re-established) Estimated uncollectible receivables per aging of receivables at 12/31/2009

P 1,300,000 5,400,000 4,750,000 125,000 25,000 165,000

On December 31, 2009 the amortized cost of accounts receivables is 32. Before year-end adjusting entries, Bass Company's account balances at December 31, 2001, for accounts receivable and the related allowance for uncollectible accounts were P500,000 and P45,000, respectively. An aging of accounts receivable indicated that P62,500 of the December 31 receivables are expected to be uncollectible. The net realizable value of accounts receivable after adjustment is 33. On June 1, 2008, Oslo Corp. sold merchandise with a list price of P15,000 to Mead on account. Oslo allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made f.o.b. shipping point. Oslo prepaid P300 of delivery costs for Mead as an accommodation. On June 12, 2008, Oslo received from Mead a remittance in full payment amounting to 34. Smart Company has P 3,000,000 note receivable from sale of plant bearing interest at 12% per annum. The note is dated June 1, 2008. The note is payable in 3 annual installments of P 1,000,000 plus interest on the unpaid balance every June 1. The initial principal and interest payment was made on June 1, 2009. The interest income for 2009 is 35. On December 1, 2009, Money Co. gave Home Co . a P 200,000 11% loan. Money paid proceeds of P 194,000 after the deduction of a P 6,000 non refundable loan origination fee. Principal and interest are due in 60 monthly present value of P 200,000 and 12.4% at a present value of P 194,000. What amount of income from this loan should Money report in its 2009 income statement? 36. On January 1, 2009, the lending company made a P 200,000 8% loan. The interest is receivable at the end of each year, with the principal amount to be received at the end of 5 years. As of December 31, 2009, the interest for the current year has not been received nor recorded because the borrower is experiencing financial difficulties. The lending company negotiated a restructuring of the loan. The payment of all of the interest based on the original will be delayed until the end the 5 year loan term. In

38. The Pacifier Company uses the net price method of accounting for cash discounts. In one of its transactions on December 15, 2010, Pacifier sold merchandise with a list price of P500,000 to a client who was given a trade discount of 20% and 15%. Credit terms were 2/10, n/30. The goods were shipped FOB destination, freight collect. Total freight charges paid by the client amounted to P7,500. On December 20, 2010, the client returned damaged goods originally billed at P60,000. What is the net realizable value of this receivable on December 31, 2010? 39. The Premier National Bank has a note receivable of P200,000 from the Marvelous Company that it is carrying at face value and is due on December 31, 2014. Interest on the note payable at 9% each December 31. The Marvelous Company paid the interest due on December 31, 2010, but informed the bank that it would probably miss the next two years' interest payments because of its financial difficulties. After that, it expected to resume its annual interest payments, but it would make the principal payment one year late, with interest paid for that additional year at the time of the principal payments. How much should be recognized as loan impairment loss in 2010? (Round off present value factors to four decimal places.) 40. Deo Company used the balance sheet approach in estimating uncollectible accounts expense. The company prepares an adjusting entry to recognize this expense at the end of each month. During the month of July. The company wrote off a P1,000 receivable and made no recoveries of previous write-offs. Following the adjusting entry for July, the credit balance in the Allowance for Doubtful accounts was P2,500 larger than it was on July 1. What amount of uncollectible account expense was recorded for July?

Answers: 1 C 2 B 3 C 4 D 5 B 6 A 7 A 8 B 9 A 10 B 11 D 12 A 13 B 14 A 15 B 16 C 17 C 18 B 19 D 20 A 21 D 22 Fair value plus transaction costs that are directly attributable to the acquisition 23 Amortized cost using effective interest method 24 520,000 25 310,000 26 1,503,540 27 122,500 28 156,400 29 94,000 30 3,564,000 31 148,000 32 437,500 33 8,532 34 290,000 35 2,005 36 67,700 37 1,600,000 38 272,500 39 31,669 40 3,500