International School of Asia and the Pacific

Intermediate Accounting 1
Quiz 5

Theories:
1. The adjusting entry to eliminate a credit balance in a receivable or to eliminate a debit balance in a
payable
a. Decreases total receivables; Increases total receivables, respectively
b. Increases total receivables; Decreases total receivables, respectively
c. Decreases total receivables; Decreases total receivables, respectively
d. Increases total receivables; Increases total receivables, respectively
2. The amount computed under the percentage of credit sales method is the
a. Bad debt expenses for the period
b. Required balance of the allowance account
c. A or b
d. None of these
3. Which of the following receivables may be presented as part of current assets?
a. Receivable from a subscriber of the entity’s own shares collectible within 12 months from end of
reporting period
b. Advances to affiliates, the settlement date is not yet agreed upon
c. Loan receivables from the entity’s officers collectible beyond 12 months
d. Long-term receivables of a construction firm. The firm’s normal operating cycle extends beyond one
year
4. Godwinlyn Co. sells goods to Erika, a customer who uses Swipe Credit Card. Godwinlyn should record
this sale as:
a. An account receivable from Erika
b. Cash receipt
c. An account receivable from Swipe
d. An increase in the allowance for doubtful accounts
5. Which of the following methods of determining bad debt expense best achieves the matching concept?
a. Percentage of net credit sales
b. Percentage of ending accounts receivable
c. Aging of accounts receivable
d. Direct write-off

Problems:
Mikie Company had the following information relating to its accounts receivable for the year ended December
31, 2006:
Accounts receivable at January 1 1,200,000
Allowance for doubtful accounts at January 60,000
Credit sales 5,300,000
Collections from customers 4,650,000
Accounts written off 75,000
Estimated uncollectible receivable per aging of receivables at
December 31 110,000
1. At December 31, 2006, Mikie ‘s allowance for doubtful accounts
a. 135,000
b. 125,000
c. 110,000
d. 95,000

2. At December 31, 2006, Mikie’s accounts receivable, before allowance for doubtful accounts, should be
a. 1,850,000
b. 1,835,000
c. 1,815,000
d. 1,775,000

The following data were taken from the records of Shiera Company for the year ended December 31, 2006:
Sales on account 3,600,000
Notes received to settle accounts 400,000
Provision for doubtful accounts 90,000
Accounts receivable determined to be worthless 25,000
Purchase on account 3,900,000
Payments to creditors 3,200,000
 Discount allowed by creditors 260,000
Merchandise returned by customers 15,000
Collections received to settle accounts 2,450,000
Notes given to creditors in settlement of accounts 250,000
Merchandise returned to suppliers 70,000
Payments on notes payable 100,000
Discounts taken by customers 40,000
Collections received in settlement of notes 180,000
3. What is the net realizable value of accounts receivable on December 31, 2006?
a. 605,000
b. 890,000
c. 825,000
d. 670,000

When examining the accounts of Keyzel Company, you ascertain that balances relating to both receivable and
payables are included in a single controlling account called receivables control that has a debit balance of
P4,850,000. An analysis of the make-up of this account revealed the following:
Debit Credit
Accounts receivable – customers 7,800,000
Accounts receivable – officers 500,000
Debit balances – creditors 300,000
Postdated checks from customers 400,000
Subscription receivable 800,000
Accounts payable for merchandise 4,500,000
Credit balances in customers’ account 200,000
Cash received in advance from customers for goods
not yet shipped 100,000
Expected bad debts 150,000
After further analysis of the agreed accounts receivable, you determined that the allowance for doubtful accounts
should be P200,000.
4. What is the correct total of current net receivables?
a. 8,950,000
b. 8,800,000
c. 8,600,000
d. 8,850,000

Arlyn Company prepared an aging of its accounts receivable at December 31, 2006 and determined that the net
realizable value of the accounts receivable 2006 was P2,500,000. Additional information is available as follows:
Allowance for uncollectible accounts at 1/1 – credit balance 280,000
Accounts written off as uncollectible 230,000
Accounts receivable at 12/31 2,700,000
Uncollectible accounts recovery 50,000
5. For the year ended December 31, 2006, Orr’s uncollectible accounts expense would be
a. 230,000
b. 200,000
c. 150,000
d. 100,000

An analysis and aging of Mariel Company’s accounts receivable at December 31, 2006 disclosed the following:
Accounts receivable 9,000,000
Allowance for uncollectible accounts, per book 500,000
Accounts estimated to be uncollectible 640,000
6. At December 31, 2006, the net realizable value of accounts receivable should be
a. 8,860,000
b. 8,500,000
c. 8,360,000
d. 7,860,000

On March 31, 2006, Lagrimas Company had an unadjusted credit balance of P100,000 in its allowance for
uncollectible accounts. An analysis of Vale’s trade accounts receivable at that date revealed the following:
Age Amount Estimated uncollectible
0 – 30 days 6,000,000 5%
31 – 60 days 400,000 10%
Over 60 days 200,000 140,000
7. What amount should Lagrimas report as allowance for uncollectible accounts in its March 31, 2006, balance
sheet?
a. 480,000
b. 400,000
c. 380,000
d. 300,000

Geraldine Company had the following accounts receivable and allowance for uncollectible accounts at the end
of 2006 before any expense adjustment:
Accounts receivable 12,000,000
Allowance for uncollectible accounts 800,000
Sales in 2006 totaled P80,000,000 (8% of sales were for cash), and write-offs of customers accounts totaled
P600,000. Allowance for uncollectible accounts is estimated to be 2% of accounts receivable.
8. What is the balance in the allowance account at the beginning of 2006?
a. 1,400,000
b. 1,160,000
c. 200,000
d. 800,000

Jamaila Company sells to wholesalers on terms 2/15, net 30. Delta has no cash sales but 50% of Jamaila’s
customers take advantage of the discount. Jamaila uses the gross method of recoding sales and trade
receivables. An analysis of Jamaila’s trade accounts receivable at December 31, 2006 revealed the following:
Age Amount Collectible
0 – 15 days 2,000,000 100%
16 – 30 days 1,200,000 95%
31 – 60 days 100,000 90%
Over 60 days 50,000 50%
3,350,000
9. In its December 31, 2006 balance sheet, what amount should Jamaila report as allowance for discounts?
a. 20,000
b. 32,400
c. 33,500
d. 40,000

The unadjusted trial balance of Anabel Company at December 31, 2006, included the following accounts:
Debit Credit
Allowance for doubtful accounts 16,000
Sales 7,225,000
Sales return 125,000
10. Anabel estimates its uncollectible receivable at 2% of net sales. For 2006, Anabel should report doubtful
accounts expense of
a. 158,000
b. 144,500
c. 142,000
d. 126,000