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MC6
If a note is exchanged for property and no interest rate is stated, at what amount should
the note be recorded at the date of exchange?
a. At fair market value of the property or note
b. At maturity value of the note
c. At face value of the note
d. at the carrying (book) value of the property
MC8 Which of the following events does not necessarily provide objective evidence that a
receivable is impaired?
a. A downgrade of the debtors credit rating
b. Significant financial difficulty of the debtor
c. Default or delinquency in interest or principal payment
d. Bankruptcy proceedings undertaken by the debtor
MC9
When the company uses the allowance method or recognizing uncollectible accounts, the
entry to write off a customers account would have what effect on profit and amortized
cost of accounts receivable?
Profit
a.
b.
c.
d.
None
Decrease
Increase
Decrease
Amortized cost
of Accounts Receivable
None
Decrease
Increase
None
MC10 Mary Quant Company prepares an accounts receivable aging schedule with a series of
computation 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
computation?
a. It is the amount of uncollectible 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.
MC11 When the allowance method of recognizing uncollectible accounts expense is used, the
entries at the time of collection of an account previously written off would
a. increase profit.
b. decrease profit.
c. increase the allowance for uncollectible accounts.
d. decrease the allowance for uncollectible accounts.
MC12 A form of receivable financing which is equivalent to an absolute sale of accounts
receivable is
a. pledge of accounts receivable.
b. assignment of accounts receivable.
c. factoring.
d. discounting of notes receivable.
MC13 Which of the following is not a required disclosure for loans and receivables?
a. The names of the debtors who defaulted on the payment of their loans or accounts
b. The criteria for recognition and basis of measurement applied
c. Material items of income and expense and gains and losses resulting from receivables
d. the nature and amount of impairment loss recognized in profit or loss
MC16 A company writes off as uncollectible an account receivable from a bankrupt customer.
The company has an adequate amount in its Allowance for Bad debts. This transaction will
a. decrease profit for the period.
b. decrease total current assets.
c. decrease the amount of owners equity.
d. have no effect on total current assets.
MC17 A 60-day, 12% interest-bearing note receivable was immediately discounted at a bank at
15%. The proceeds received from the bank upon discounting would be
a. maturity value less the discount at 15%.
b. maturity value less the discount at 12%.
c. maturity value plus the discount at 15%.
d. face value less the discount at 15%.
MC18 A 120-day, 15% interest-bearing note receivable is discounted to a bank at 18% after
being held for 45 days. The proceeds received from the bank upon discounting would be
a. maturity value less the discount at 18% for 120 days.
b. maturity value less the discount at 18% for 45 days.
c. maturity value less the discount at 18% for 75 days .
d. maturity value less the discount at 15% for 75 days.
Cost of sales
Cash received from customers
Cash
P50,000
65,000
Credit
P450,000
585,000
Total
P500,00
650,000
Assuming merchandise was marked to sell as follows: Cash sales, at 30% above cost and credit
sales, at 40% above cost, all of which are collectible. The balance of accounts receivable at the
end of the period was
a. P12,500
b. P45,000
c. P135,00
d. P147,500
Solution: P450,000 x 1.4 = P630,000
630,000-585,000 = P45,000