Western Leyte College of Ormoc city, Inc. - FAR 1013. Receivables ( ALL ANSWERS AND SOLUTIONS ARE HIGHLIGHTED IN RED AND 100% CORRECT )

Document Content and Description Below

RECEIVABLES Easy: 1. If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible? ... a. Uncollectible Accounts Payable b. Bad Debt Expense c. Accounts Receivable d. Allowance for Doubtful Accounts 2. Under the allowance method, writing off an uncollectible account a. affects both balance sheet and income statement accounts. b. affects only income statement accounts. c. is not acceptable practice. d. affects only balance sheet accounts. 3. Assume Julie Corp., an equipment distributor, sells a piece of machinery with a list price of P800,000 to Arch Inc. Arch Inc. will pay P850,000 in one year. Julie Corp. normally sells this type of equipment for 90% of list price. How much should be recorded as revenue? a. 720,000 b. 850,000 c. 800,000 d. 765,000 SOLUTION: (P800,000 × .90) = P720,000 4. Joanne Corporation had a 1/1/13 balance in the Allowance for Doubtful Accounts of P12,000. During 2013, it wrote off P8,640 of accounts and collected P2,520 on accounts previously written off. The balance in Accounts Receivable was P240,000 at 1/1 and P288,000 at 12/31. At 12/31/13, Joanne estimates that 5% of accounts receivable will prove to be uncollectible. What should Joanne report as its Allowance for Doubtful Accounts at 12/31/13? a. 5,760 b. 5,880 c. 8,280 d. 14,400 SOLUTION: P288,000 × .05 = P14,4005. A trial balance before adjustments included the following: Debit Credit Sales 425,000 Sales return 14,000 Accounts receivable 43,000 Allowance for bad debts 760 If the estimate of uncollectibles is made by taking 2% of net sales, the amount of the adjustment is a. 9,740 b. 6,700 c. 8,220 d. 8,500 SOLUTION: (P425,000 - P14,000) × .02 = P8,220 6. On the December 31, 2013 balance sheet of Julie Co., the current receivables consisted of the following: Trade receivables 75,000 Allowance for uncollectible accounts (2,000) Claim against shipper for goods lost in transit (November 2013) 3,000 Selling price of unsold goods sent by Julie on consignment at 130% of cost (not included in Julie 's ending inventory) 26,000 Security deposit on lease of warehouse used for storing some inventories 30,000 132,000 At December 31, 2013, the correct total of Julie's current net receivables was a. 102,000 b. 132,000 c. 106,000 d. 76,000 SOLUTION: P75,000 - P2,000 + P3,000 = P76,000 7. A method of estimating doubtful accounts that emphasizes asset valuation rather than income measurement is the allowance method based on a. Aging of receivables b. Credit sales less sales returns and allowances c. Gross sales d. Direct write-off8. Renz Co. prepared an aging of its accounts receivable at December 31, 2013 and determined that the net realizable value of the receivables was P300,000. Additional information is available as follows: Allowance for uncollectible accounts, 1/1/13 - credit balance 34,000 Accounts written off as uncollectible during 2013 23,000 Accounts receivable at 12/31/13 325,000 Uncollectible accounts recovered during 2013 5,000 For the year ended December 31, 2013, Renz's uncollectible accounts expense would be a. 9,000 b. 16,000 c. 25,000 d. 23,000 SOLUTION: Allowance for Doubtful Acct. balance P34,000 + P5,000 - P23,000 = P16,000 (before bad debt expense) P325,000 - P300,000 - P16,000 = P9,000 (bad debt expense). 9. Before year-end adjusting entries, Matthew Company's account balances at December 31, 2013, for accounts receivable and the related allowance for uncollectible accounts were P600,000 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 a. 537,500 b. 492,500 c. 555,000 d. 582,500 SOLUTION: [Show More]

Last updated: 2 years ago

Preview 1 out of 61 pages