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CEBU CPAR CENTER, INC.


RECEIVABLES - THEORY
1. Receivables denominated in a foreign currency should be
a. Translated to local currency using the exchange rate at the time the receivables arise
b. Shown at face value of the foreign currency
c. Translated to local currency using the exchange rate at balance sheet date
d. Translated to local currency using the exchange rate when the balance sheet is issued
2. Trade receivables are classified as current assets when they are reasonably expected to be
collected
a. Within one year
b. Within the normal operating cycle
c. Within one year or within the normal operating cycle whichever is shorter
d. Within one year or within the normal operating cycle whichever is longer
3. Nontrade receivables are classified as current assets only if they are reasonably expected to
be realized in cash
a. Within one year or normal operating cycle, whichever is shorter.
b. Within the normal operating cycle
c. Within one year or the normal operating cycle, whichever is longer
d. Within one year, the length of the operating cycle notwithstanding
4. Installments receivable arising from sales of household appliances should be classified as
a. Current assets
b. Noncurrent assets
c. Current assets; however, the amount not realizable within one year should be disclosed, if
material
d. None of these
5. In the case of long-term installments receivable (real estate installment sales) where a major
portion of the receivables will be collected beyond the normal operating cycle
a. The entire receivables are classified as current without disclosure of the amount not
currently due
b. The entire receivables are classified as noncurrent
c. Only the portion currently due is classified as current and the balance as noncurrent
d. The entire receivables are classified as current with disclosure of the amount not currently
due
6. Receivables from subsidiaries and affiliates, if significant should be classified as
a. Current assets
b. Noncurrent assets
c. Either as noncurrent or current depending on the expectation of realizing them within one
year or over one year
d. Intangible assets
7. Receivables from officers, directors and employees for goods sold or services rendered in the
ordinary course of business
a. Are considered current if proper control is exercised in granting credit and the accounts are
currently collectible
b. Are not included in trade accounts receivable
c. Are included in current assets even if the receivables are actually loans and advances and
the collection is unlikely within a year
d. Are always classified as noncurrent
8. Credit balances in accounts receivable should be classified as
a. Current liability
b. Part of accounts payable
c. Noncurrent liability
d. Deduction from accounts receivable

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9. A method of estimating doubtful accounts that focuses on the income statement rather the
balance sheet is the allowance method based on
a. Direct writeoff
c. Credit sales
b. Aging of trade accounts receivable
d. Balance of accounts receivable
10. 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. Direct writeoff
c. Gross sales
d. Credit sales less sales returns and allowances
11. A company uses the allowance method for recognizing doubtful accounts. The entry to record
the writeoff of a specific uncollectible account
a. Affects neither net income nor working capital
b. Affects neither net income nor accounts receivable
c. Decreases both net income and working capital
d. Decreases both net income and accounts receivable
12. When the allowance method of recognizing bad debt expense is used, the entries at the time of
collection of an account previously written off would
a. Decrease the allowance for doubtful accounts
b. Increase net income
c. Have no effect on the allowance for doubtful accounts
d. Have no effect on net income
13. When a specific customers account receivable is written off as uncollectible, what will be the
effect on net income under each of the following methods of recognizing bad debt expense?
Allowance
Direct writeoff
a. None
Decrease
b. Decrease
None
c. Decrease
Decrease
d. None
None
14. If receivables are hypothecated against borrowings, the amount of receivables involved should
be
a. Disclosed in the statements or notes
b. Excluded from the total receivables, with disclosure
c. Excluded from the total receivables, with no disclosure
d. Excluded from the total receivables and a gain or loss is recognized between the face value
and the amount of borrowings
15. It is a predetermined amount withheld by a factor as a protection against customer returns,
allowances and other special adjustments.
a. Equity in assigned accounts
c. Commission
b. Service charge
d. Factors holdback
16. Which of the following is true when accounts receivable are factored without recourse?
a. The transaction may be accounted for as either a secured borrowing or as a sale.
b. The receivables are used as collateral for a promissory note issued to the factor by the
owner of the receivables.
c. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the
receivables.
d. The financing cost should be recognized ratably over the collection period of the
receivables.
17. Notes receivable discounted with recourse should be
a. Included in total receivables with disclosure of contingent liability
b. Included in total receivables without disclosure of contingent liability
c. Excluded from total receivables with disclosure of contingent liability
d. Excluded from total receivables without disclosure of contingent liability
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