1. Which of the following is classified as a financial asset? 10.

10. On the basis of substance over form, the interest on the non-interest bearing note is
a. Ordinary shares of the issuer c. Accounts receivable equal to
b. Loans payable by the borrower d. Inventory a. Zero
b. The excess of the face value over the present value
2. Statement I: Trade receivables are classified as current assets if they are to be collected c. The excess of the present value over the face value
within one year or within the normal operating cycle, whichever is shorter. d. The excess of the market value over the face value
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. 11. Uncollectible account expense:
a. Both statements are true c. Only statement I is true a. Should not occur if a company properly investigates customers based on
b. Both statements are false d. Only statement I is false credit history
b. Is the amount an entity must pay whenever a customer fails to pay his or her
3. Which of the following items is a trade receivable? account
a. Claims in litigation c. Amounts due from customers c. Is the amount an entity must pay to a collection agent to recover amounts on
b. Loans to employees d. Receivables from affiliates overdue accounts
d. Represents the loss in accounts receivable that eventually turn out to be
4. The operating cycle uncollectible
a. Cannot exceed a period of one year
b. Refers to the seasonal variations experienced by business entities 12. A method of estimating uncollectible accounts that emphasizes asset valuation rather
c. Should be used to classify asset and liabilities as current if the cycle is less than than income measurement is the allowance method based on
one year a. Aging of receivables c. Gross credit sales
d. Measures the time elapsed between cash disbursement for inventory and b. Direct write-off d. Net credit sales
cash collection of the sales price
13. The advantage of relating bad debt expense to accounts receivable is that this approach
5. On the balance sheet date, accounts receivable are generally reported at a. Does not require knowledge of the balance in the allowance for doubtful
a. Pawn value c. Maturity value accounts
b. Net realizable value d. Market value b. Gives a reasonably correct amount of receivables in the balance sheet
c. Does not require estimates of uncollectible accounts
6. Receivables denominated in foreign currency should be translated to foreign currency at d. Relates bad debt expense to the period of sale
a. Closing rate c. Historical rate
b. Average rate d. Mortality rate 14. Which method of recording bad debt loss is consistent with accrual accounting?
a. Allowance method c. Percentage of sales method
7. A credit balance in accounts receivable resulting from overpayments, advanced b. Direct write-off method d. Percent of accounts receivable method
payments and sales returns should be classified as (CUSTOMERS’ CREDIT BALANCE)
a. A current liability c. A contra asset 15. Under the allowance method, the entry to recognize bad debt expense
b. A long-term liability d. A note disclosure a. Increases net income c. Has no effect on current assets
b. Decreases current assets d. Has no effect on net income
8. When a note receivable is dishonored, it is debited to
a. Accounts receivable at face value 16. Under the allowance method, the allowance for doubtful accounts will decrease when
b. Accounts receivable at face value plus interest and other charges a. Specific account receivable is collected
c. Dishonored note receivable at face value b. Account previously written off is collected
d. Dishonored note receivable at face value plus interest and other charges c. Specific uncollectible account is written off
d. Account previously written off becomes collectible
9. 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 17. Under the allowance method, the entry to record the write-off of a specific account will
Statement III: Short-term notes; interest bearing or non-interest bearing, are stated at a. Decrease both accounts receivable and net income
face value. b. Increase the allowance for doubtful accounts and decrease the net income
a. Statements I, II and III are true c. Only statement II is false c. Decrease both accounts receivable and the allowance for doubtful accounts
b. Only statement I is true d. Only statement III is false 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 Nonoy elected to estimate its doubtful accounts by using percent of accounts receivable
written off would method. Nonoy determined that 6% would be a good estimate. There were no write offs
a. Increase net income nor recoveries during the year. What amount should be reported as doubtful accounts
b. Have no effect on net income expense in the current year as a result of this change?
c. Decrease the allowance for doubtful accounts
d. Have no effect on the allowance for doubtful accounts 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
19. Under the direct write-off method, uncollectible accounts expense is recognized current year:
a. As a percentage of net sales during the period
b. As a percentage of net credit sales during the period Accounts written off as uncollectible during the year 60,000
c. As indicated by aging the accounts receivable at the end of the period Collection from customers beyond discount period
d. As specific accounts receivable are determined to be worthless (Including recovered accounts of 15,000) 1,500,000
Credit sales, year-ended December 31 3,300,000
20. For banks and financial institutions, receivables arise primarily from Sales returns and allowances 200,000
a. Loans c. Withdrawals Collection from customers within discount period 882,000
b. Deposits d. Credit Sales Allowance for doubtful accounts, January 1 54,000
Accounts receivable, January 1 950,000
21. Under PAS 39, loans and receivables are financial assets with fixed or determinable
amounts that are What is the net realizable value of the accounts receivable at December 31?
a. Derivative, quoted c. Non-derivative, quoted
b. Derivative, non-quoted d. Non-derivative, non-quoted 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
22. Under PAS 39, loans and receivables are initially measured at 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: Finley Company 80, 000
Rios, Inc. 200, 000
0-30 days 5,000,000 .98 collectible Rafael Co. 120, 000
31-60 days 2,000,000 .90 collectible Hunter, Inc, 100, 000
Over 60 days 1,000,000 .80 collectible All other receivables 500, 000

Net credit sales for the year 40,000,000 The entity determines that Finley Company’s receivable is impaired by P40, 000 and
Allowance for doubtful accounts: Hunter’s receivable is totally impaired. The other receivables from Rafael and Rios are
Balance, January 1, 2011 – credit balance 450,000 not considered impaired. The entity determines that a composite rate of 2% is
Balance before adjustment, December 31, 2011 –debit balance 20,000 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:
Trade accounts receivable 93, 000
Accounts receivable 6,000,000 Allowance for uncollectible accounts 2, 000
Credit sales 12,000,000 Claim against shipper for goods lost in transit in November 2011 3, 000
Doubtful accounts expense (2% of the credit sales) 240,000 Selling price of unsold goods sent by Jenine in consignment at 130% of
Allowance for doubtful accounts – January 1 50,000 cost and not include in Jenine’s ending inventory 26, 000
Security deposit on lease of warehouse used for storing inventories 30, 000
 addition, the amount of principal repayment will be dropped from P 200,000 to
What is the correct total of current net receivables on December 31, 2011? P100,000. The prevailing interest rate for similar type of the loan as of December 31,
2009 is 10%.
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 The loan impairment loss to be recognize in 2009 profit or loss is
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 37. Roxy Company had the following information relating to its account receivable:
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 Accounts receivable at 12/31/2008 P 1,300,000
years is 68. On December 31, 2011, what carrying amount should be reported for the Credit sales for 2009 5,400,000
two notes receivable? Collection from customers for 2009,
excluding recovery 4,750,000
31. Jerwin Bank grants a 10-year loan to a borrower n the amount of P150, 000 with stated Accounts written off 9/30/2009 125,000
interest rate of 6%. Payments are due monthly and are computed to be P1, 665. Jerwin Collection of accounts written off in prior year
Bank incurred P4, 000 of direct loan origination cost and P2, 000 of indirect loan (customer credit was not re-established) 25,000
origination cost. In addition, Jerwin Bank charged the borrower a 4-point nonrefundable Estimated uncollectible receivables
loan origination fee. What carrying amount of the loan receivable should be reported per aging of receivables at 12/31/2009 165,000
initially by Jerwin Bank?
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 38. The Pacifier Company uses the net price method of accounting for cash discounts. In
P500,000 and P45,000, respectively. An aging of accounts receivable indicated that one of its transactions on December 15, 2010, Pacifier sold merchandise with a list price
P62,500 of the December 31 receivables are expected to be uncollectible. The net of P500,000 to a client who was given a trade discount of 20% and 15%. Credit terms
realizable value of accounts receivable after adjustment is 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
33. On June 1, 2008, Oslo Corp. sold merchandise with a list price of P15,000 to Mead on returned damaged goods originally billed at P60,000.
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 What is the net realizable value of this receivable on December 31, 2010?
Mead as an accommodation. On June 12, 2008, Oslo received from Mead a remittance
in full payment amounting to 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
34. Smart Company has P 3,000,000 note receivable from sale of plant bearing interest at the note payable at 9% each December 31. The Marvelous Company paid the interest
12% per annum. The note is dated June 1, 2008. The note is payable in 3 annual due on December 31, 2010, but informed the bank that it would probably miss the next
installments of P 1,000,000 plus interest on the unpaid balance every June 1. The initial two years' interest payments because of its financial difficulties. After that, it expected
principal and interest payment was made on June 1, 2009. to resume its annual interest payments, but it would make the principal payment one
The interest income for 2009 is year late, with interest paid for that additional year at the time of the principal
payments.
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 How much should be recognized as loan impairment loss in 2010? (Round off present
fee. Principal and interest are due in 60 monthly present value of P 200,000 and 12.4% value factors to four decimal places.)
at a present value of P 194,000. What amount of income from this loan should Money
report in its 2009 income statement? 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
36. On January 1, 2009, the lending company made a P 200,000 8% loan. The interest is of each month. During the month of July. The company wrote off a P1,000 receivable
receivable at the end of each year, with the principal amount to be received at the end and made no recoveries of previous write-offs. Following the adjusting entry for July,
of 5 years. As of December 31, 2009, the interest for the current year has not been the credit balance in the Allowance for Doubtful accounts was P2,500 larger than it was
received nor recorded because the borrower is experiencing financial difficulties. The on July 1.
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 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