Maria Company builds and sells equipment used in manufacturing pharmaceuticals.

On December 31, 2013, the entity reported accounts receivable as follows:

Joey Company 80,000
Mary Ann, Inc. 200,000
Rafael Co. 120,000
Josh, Inc. 100,000
All other receivables 500,000
The entity determines that Joey Company's receivable is impaired by P40,000 and Josh's receivable is totally impaired. The other receivables from Rafael and
Mary Ann 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 2013?
Answer: 56,400

Estimation of uncollectible accounts receivable based on a percentage of sales

a. Emphasizes measurement of the net realizable value of accounts receivable
b. Is only acceptable for tax purposes
c. Emphasizes measurement of total assets
d. Emphasizes measurement of bad debt expense

Allowance for Doubtful Accounts has a credit balance of P1,500 at the end of the year (before adjustment), and an analysis of customers' accounts indicates
doubtful accounts of P17,900. What is the entry to record the provision for doubtful accounts?
Answer: Dr. BDE 15,400 Cr. AFBD 15,400

Which of the following is not acceptable in estimating uncollectible accounts receivable under GAAP?
The estimate of uncollectible accounts is based on a percentage of accounts receivable balance at the end of a period The estimate of uncollectible
accounts is based on a percentage of sales for the period The estimate of uncollectible accounts is based on an aging schedule No estimate of
uncollectible accounts is made but accounts are written off when it is determined they cannot be collected
Financial Accounting and Reporting - Receivable (Average)
Question #5
An aging of a company's accounts receivable indicates that P3,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a P1,200 credit
balance, the adjustment to record bad debts for the period will require a
credit to Allowance for Doubtful Accounts for P4,000. debit to Bad Debt Expense for P4,200. debit to Bad Debts Expense for P3,000. debit to
Bad Debts Expense for P1,800.
Financial Accounting and Reporting - Receivable (Average)
Question #6
Which method of recording bad debt loss is consistent with the accrual accounting?
 Direct write-off method
Percent of accounts receivable method
Percent of sales method
Allowance method

Financial Accounting and Reporting - Receivable (Average)

Question #7
When the allowance method of recognizing bad debts expense is used, the entries at the time of collection of an account previously written off would
Increase net income
Have no effect on the allowance for doubtful accounts
Have no effect on net income
Decrease the allowance for doubtful accounts

Financial Accounting and Reporting - Receivable (Average)

Question #8
A company which has an adequate amount in its Allowance for Doubtful Accounts, write off as uncollectible an account receivable from a bankrupt customer. This
action will:
Reduce net income for the period
Reduce total current assets
Reduce the amount of equity
Have no effect on total current assets

Financial Accounting and Reporting - Receivable (Average)

Question #9
Receivables denominated in foreign currency should be translated to local currency using
Closing rate Historical rate Average rate Mortality rate
Financial Accounting and Reporting - Receivable (Average)
Question #10
In its financial statements, an entity uses the cost method of accounting for its 15% ownership of an investee. The investor has a receivable from the investee at
year-end. How should the receivable be reported in investor's year-end statement of financial position?
a. The total receivable should be included as part of the investment, without separate disclosure.
b. Eighty-five percent of the receivable should be reported separately, with the balance offset against the investee's payable to the investor
c. The total receivable should be reported separately
d. The total receivable should be offset against the investee's payable to the investor, without separate disclosure.

Under the allowance method, the entries at the time of collection of an account previously written off would
a. Decrease the allowance for doubtful accounts
b. Have no effect on the allowance for doubtful accounts
c. Increase net income
d. Have no effect on net income

Under the allowance method, the entry to record the write-off of a specific account would
a. Increase the allowance for uncollectible accounts and decrease net income
b. Decrease accounts receivable and increase the allowance for uncollectible accounts
c. Decrease both accounts receivable and the allowance for uncollectible accounts
d. Decrease both accounts receivable and net income

Financial Accounting and Reporting - Receivable (Average)

Question #13
The allowance method of recognizing bad debts expense can be applied in more than one way. What two conditions must be met before the allowance method
can be used?
Bad debts must be relevant and reliable
Bad debts must be persistent over time and the method used to estimate them is consistently applied
Bad debts must be expected and material
Bad debts must be probable and measurable

Financial Accounting and Reporting - Receivable (Average)

Question #14
When the direct writeoff method is used, the entry to write off a specific customer account would
 Increase net income
Have no effect on net income
Increase both accounts receivable and net income
Decrease both accounts receivable and net income

Financial Accounting and Reporting - Receivable (Average)

Question #15
An aging of a company's accounts receivable indicates that P4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a P1,200 credit
balance, the adjustment to record bad debts for the period will require a
debit to Allowance for Doubtful Accounts for P4,000. debit to Allowance for Doubtful Accounts for P2,800. debit to Bad Debts Expense for P2,800.
credit to Allowance for Doubtful for P4,000.
Financial Accounting and Reporting - Receivable (Average)
Question #16
Allowance for Doubtful Accounts has a credit balance of P800 at the end of the year (before adjustment), and an analysis of accounts in the customers ledger
indicates doubtful accounts of P15,000. Which of the following entries records the proper provision for doubtful accounts?
debit Allowance for Doubtful Accounts, P15,800; credit Uncollectible Accounts Expense, P15,800 debit Uncollectible Accounts Expense, P800; credit
Allowance for Doubtful Accounts, P800 debit Uncollectible Accounts Expense, P14,200; credit Allowance for Doubtful Accounts, P14,200 debit Allowance
for Doubtful Accounts, P800; credit Uncollectible Accounts Expense, P800
Financial Accounting and Reporting - Receivable (Average)
Question #17
Estimation of uncollectible accounts receivable based on a percentage of sales
Is only acceptable for tax purposes
Emphasizes measurement of net realizable of accounts receivable
Emphasizes measurement of bad debts
Emphasizes measurement of total assets

Financial Accounting and Reporting - Receivable (Average)

Question #18
A 60-day, 12% note for P10,000, dated May 1, is received from a customer on account. If the note is discounted on May 21 at 15%, the amount of interest
revenue or expense to be recorded by the payee of the note on May 21 is
P30 interest expense P30 interest revenue P170 interest revenue P170 interest expense
Financial Accounting and Reporting - Receivable (Average)
Question #19
Nontrade receivables classified as current assets only if they are reasonably expected to be realized in cash
Within one year or the normal operating cycle, whichever is longer
Within the normal operating cycle
Within one year or normal operating cycle, whichever is shorter
Within one year, the length of the operating cycle notwithstanding

Financial Accounting and Reporting - Receivable (Average)

Question #20
All of the following are problems associated with the valuation of accounts receivable except
Uncollectible accounts
Allowances granted
Cash discounts under the net method
Returns