FAR Accounts-Receivables Drills-Quizzers Final

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Drills and Quizzers
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Topic
DRILLS AND QUIZZERS
1. Which statement is incorrect regarding PFRS 15?

a. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from
contracts with customers.
b. The standard supersedes revenue recognition guidance in PAS 18 Revenue and PAS 11 Construction Contracts
and related interpretations.
c. The core principle is that an entity recognizes revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services.
d. None, all the statements are correct.
Answer: D
None, all the statements are correct.
Topic: Revenue Recognition
Level of Difficulty: Easy
Source: Rey Ocampo’s FAR Review
2. Arrange in proper sequence the five-step approach that entities will follow in recognizing revenue in accordance with
PFRS 15:
I. Determine the transaction price
II. Identify the contract(s) with the customer
III. Identify the separate performance obligations in the contract
IV. Recognize revenue when (or as) each performance obligation is satisfied
V. Allocate the transaction price to separate performance obligations
a. I, II, III, IV and V c. III, II, I, V and IV
b. II, III, I, V and IV d. II, III, V, I and IV
Answer: B
5-steps model
II, III, I, V and IV
3. For PFRS 15 to apply, a contract with a customer should meet which of the following conditions?
I. The contract has been approved by the parties to the contract.
II. Each party’s rights in relation to the goods or services to be transferred can be identified.
III. The payment terms for the goods or services to be transferred can be identified.
IV. The contract has commercial substance.
This document is the property of PHINMA EDUCATION 1

Drills and Quizzers
V. It is probable that the consideration to which the entity is entitled to in exchange for the goods or services will be
collected.
a. I, II, III, IV and V c. I, II, III and V
b. I, III, IV and V d. I, II, III and IV
Answer: A
4. Performance obligation is a promise in a contract with

a customer to transfer to the customera. A good or service (or a bundle of goods or services) that is distinct.
b. A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to
the customer.
c. Either a or b.
d. Neither a nor b.
Answer: C
5. Which statement is incorrect regarding transaction price in accordance with PFRS 15?
a. Transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring
promised goods or services to a customer, excluding amounts collected on behalf of third parties.
b. An entity shall consider the terms of the contract and its customary business practices to determine the transaction
price.
c. The nature, timing and amount of consideration promised by a customer affect the estimate of the
transaction price.
d. The consideration promised in a contract with a customer may include fixed amounts but not variable amounts.
Answer: D
6. When determining the transaction price, an entity shall consider the effects of:
I. Variable consideration
II. Constraining estimates of variable consideration
III. The existence of a significant financing component in the contract
IV. Non-cash consideration
V. Consideration payable to a customer
a. I, II, III, IV and V c. III, IV and V only
b. II, III, IV and V only d. III and IV only
Answer: A

Drills and Quizzers
7. For the purpose of determining the transaction price, an entity shall assume
a. That the goods or services will be transferred to the customer as promised in accordance with the existing contract.
b. That the contract may be cancelled.
c. That the contract may be renewed
d. That the contract may be modified.
Answer: A
8. Where a contract has multiple performance obligations, an entity will allocate the transaction price to the
performance obligations in the contract by reference to their relative
a. Standalone selling prices.
b. Fair values.
c. Net realizable values.
d. Any of the above.
Answer: A
9. Which statement is incorrect regarding recognition of revenue?

a. Revenue is recognized as control is passed, either over time or at a point in time.
b. Control of an asset is defined as the ability to direct the use of and obtain substantially all of the remaining benefits
from the asset.
c. Control includes the ability to prevent others from directing the use of and obtaining the benefits from the asset.
d. The benefits related to the asset are the potential cash flows that may be obtained only directly.
Answer: DD
10. Which of the following statements is true?

A. revenue is usually recorded when goods are shipped
B. revenue is recorded when cash collection is made.
C. revenue is usually recorded upon delivery to the customer.
D. revenue is recorded either when the sale is made, collection occurs and/or delivery is made. It is the company's
decision.
Answer: A
Source: Intermediate Accounting by Skousen
11. Miranda Corp. received an order from a customer on October 1. The toys were shipped on October 15. The
customer sent a check for full payment on November 5. Miranda received the check on November 10 and deposited it
in the bank account. Miranda should record sales revenue related to this series of transactions on

Drills and Quizzers
A. October 1.
B. October 15.
C. November 5.
D. November 10.
Answer: B
12. A customer purchased P5,000 of goods on credit from Discount Paper Supply on September 1. The customer
received the bill on September 13 and mailed a P5,000 check on September 30. Discount Paper Supply received the
check on October 4. In recording this transaction, Discount Paper Supply should credit Sales Revenue for P5,000 on
A. September 1.
B. September 13.
C. September 30.
D. October 4.
Answer: A
13. In accordance with PFRS 15, a receivable is

a. An entity’s right to consideration that is unconditional (only the passage of time is required before payment of that
consideration is due).
b. An entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer
when that right is conditioned on something other than the passage of time (for example, the entity’s future
performance).
c. An entity’s obligation to transfer goods or services to a customer for which the entity has received
consideration (or the amount is due) from the customer.
d. A party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary
activities in exchange for consideration.
Answer: A
Topic: Definition
14. The term "receivables" includes all

a. money claims against other entities.
b. merchandise to be collected from individuals or companies.
c. cash to be paid to creditors.
d.cash to be paid to debtors.
Answer: A
Topic: Definition
Source: Management Accounting by Warren
15. Which of the following statements is incorrect regarding receivables?

Drills and Quizzers
A. Receivables are financial assets.

B. Receivables are financial instruments.
C. Accounts receivable are written promises of the purchaser to pay for goods or services.
D. Nontrade receivables are may be reported as separate items in the statement of financial position.
Answer: C
Topic: Subsequent Measurement
Source: Financial Accounting and Reporting by Conrado Valix
16. At initial recognition, an entity shall measure trade receivables at their transaction price (as defined in
PFRS 15) if the trade receivables
a. Do not contain a significant financing component in accordance with PFRS 15.
b. When the entity applies the practical expedient in accordance with paragraph 63 of PFRS 15.
c. Either a or b.
d. Neither a nor b.
Answer: C
Topic: Initial Measurement
17. Receivables not measured initially at their transaction price are measured initially at
a. Fair value
b. Fair value less costs to sell
c. Fair value minus transaction costs that are directly attributable to the acquisition of the financial asset.
d. Fair value plus transaction costs that are directly attributable to the acquisition of the financial asset.
Answer: D
18. All of the following are problems associated with the measurement of accounts receivable, except
A. Returns
B. Allowances granted
C. Uncollectible accounts
D. Cash discounts under the net method
Answer: D
19. A discount given to a customer for purchasing a large volume of merchandise is typically referred to as a
a. quantity discount.
b. cash discount.
c. trade discount.
d. size discount.
Answer: C

Drills and Quizzers

Source: Intermediate Accounting by Libby
20. Accounts receivable shall be recognized initially at

A. Current value C. Face value
B. Discounted value D. Maturity value
Answer: C
21. If the ideal measure of short-term receivables in the statement of financial position is the discounted amount of the
cash to be received in the future, failure to follow this practice usually does not make the statement of financial position
misleading because
A. The amount of the discount is not material.
B. Most receivables can be sold to a bank or factor.
C. Most short-term receivables are not interest-bearing.
D. The allowance for doubtful accounts includes a discount element.
Answer: A
22.Credit terms of 2/10, n/30 indicate that a

A. two percent discount for early payment is available if the invoice is paid before the tenth day of the month following
the month to of sale.
B. two percent discount for early payment is available within ten days of the date of sale.
C. ten percent discount for early payment is available if the invoice is paid within two days of the date of the invoice.
D. two percent discount for early payment is available if the invoice is paid after the tenth day, but before the thirtieth
day of the invoice date.
Answer: B
Topic: Receivable Transactions
23. When a company ships product to a customer with the terms FOB (free on board) destination, which of the
following is true?
A. The seller will pay the shipping charges and title will not be exchanged until goods are received by the customer.
B. The buyer will pay the shipping charges and title is exchanged at point of shipment.
C. The seller will pay the shipping and title is exchanged at point of shipment.
D. The buyer will pay the shipping and title is exchanged when the goods are received by the customer
Answer: A

Drills and Quizzers
24. When a credit sale is made with terms of 2/10, net 30 on May 10 and the customer's check is received on May 19,
which of the following is true about the May 19 journal entry?
A. The debit to cash will equal the credit to accounts receivable because the discount was recorded on May 10.
B. There will be a debit to sales discounts on May 10.
C. The debit to cash will be less than the credit to accounts receivable on May 19.
D. There will be a credit to sales discounts on May 19.
Answer: C
Source: Managerial Accounting by Warren
25. When goods are sold to a customer with credit terms of 2/10, n/30, the customer will receive a
A. 10% discount if they pay within 2 days.
B. 2% discount if they pay 10% of the amount due within 30 days.
C. 10% discount if they pay within 30 days.
D. 2% discount if they pay within 10 days.
Answer: D
26. An advantage of using the net price method of recording cash discounts on credit sales is
a. It simplifies recording of sales returns and allowances.
b. It eases communication with customers about their balances.
c. It requires less record-keeping efforts than the gross method.
d. It properly reflects current period sales revenue.
Answer: D
Level of Difficulty: Moderate
Source: FAR Review by Rey Ocampo
27. In accordance with PFRS 15, how should volume rebates and/or discounts on goods or services applied
retrospectively be accounted for?
a. As variable consideration.
b. As customer options to acquire additional goods or
services at a discount.
c. Either a or b.
d. Neither a nor b.
Answer: A
28. In accordance with PFRS 15, how are variable considerations accounted for?
a. Included in transaction price.
b. Included in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of
cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is

Drills and Quizzers
subsequently resolved.
c. Included in the transaction price only to the extent that it is highly probable that a significant reversal in the amount of
cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is
subsequently resolved.
d. Excluded from transaction price.
Answer: C
29. To account for the transfer of products with a right of return (and for some services that are provided subject to a
refund), an entity shall recognize
a. Revenue for the transferred products in the amount of consideration to which the entity expects to be entitled
(therefore, revenue would not be recognized for the products expected to be returned).
b. A refund liability.
c. An asset (and corresponding adjustment to cost of sales) for its right to recover products from customers on settling
the refund liability.
d. All of these.
Answer: D
30. Which statement is incorrect regarding a refund liability?

a. An entity shall recognize a refund liability if the entity receives consideration from a customer and expects to refund
some or all of that consideration to the customer.
b. A refund liability is measured at the amount of consideration received (or receivable) for which the entity does not
expect to be entitled.
c. The refund liability shall be updated at the end of each reporting period for changes in circumstances.
d. Changes in refund liability shall be recognized as other income or expense.
Answer: D
31. Which statement is incorrect regarding an asset recognized for an entity’s right to recover products from a customer
on settling a refund liability?
a. It shall initially be measured by reference to the former carrying amount of the product (for example, inventory) less
any expected costs to recover those products (including potential decreases in the value to the entity of returned
products).
b. At the end of each reporting period, an entity shall update the measurement of the asset arising from changes in
expectations about products to be returned.
c. An entity shall offset the asset and the refund liability.
Answer: D

Drills and Quizzers
32. The impairment requirement in PFRS 9 is based on:

a. Expected Credit Loss (ECL) model
b. Incurred Loss Model
c. Either a or b
d. Neither a nor b
Answer: A
Source: iCare CPA Exam Review
33. In applying PFRS 9 impairment requirements, an entity needs to follow:

a. The general approach
b. The simplified approach
c. The credit adjusted EIR approach
d. any of the above
Answer: A
Source: iCare CPA Exam Review
34. Which of the following statements is incorrect regarding how the impairment assessment of accounts receivable is
to be performed?
A. Any accounts receivable not individually assessed should be collectively assessed for impairment.
B. Not individually significant accounts receivable should be assessed individually and if impaired, the impairment loss
is recognized.
C. Individually significant accounts receivable should be considered for impairment separately and if impaired, the
impairment loss is recognized.
D.Any account receivable individually assessed that is not considered impaired should be included with a group of
assets with similar credit-risk characteristics and collectively assessed for impairment.
Answer: B
35. Which of the following is not permitted in accounting for uncollectible accounts receivable?
A. Direct writeoff method
B. Percentage of sales, allowance method
D. Percentage of accounts receivable, allowance method
C. All of the choices are acceptable under PFRS
Answer: A
36. Which of the following methods of determining bad debt expense does not match expense and revenue?

Drills and Quizzers
A. Charging bad debts as accounts are written off as uncollectible

B. Charging bad debts with a percentage of sales under the allowance method
C. Charging bad debts with a percentage of accounts receivable under the allowance method
D. Charging bad debts with an amount derived from aging the accounts receivable under the allowance method
Answer: A
37. When the direct writeoff method of recognizing bad debt expense is used, the entry to write off a specific customer
account would
A. Increase net income
B. Have no effect on net income
C. Increase accounts receivable and increase net income
D. Decrease accounts receivable and decrease net income
Answer: D
38. Which method of recording bad debt loss is consistent with accrual accounting?
A. Allowance method C. Percent of accounts receivable method
B. Direct writeoff method D. Percent of sales method
Answer: A
39. Why is the allowance method preferred over the direct writeoff method of accounting for bad debts?
A. Estimates are used.
B. The allowance method is used for tax purposes.
C. Improved matching of bad debt expense with revenue is achieved.
D. Determining worthless accounts under direct writeoff method is difficult to do.
Answer: C
40. When the allowance method of recognizing bad debt expense is used, the allowance for doubtful accounts would
decrease when
A. Specific account receivable is collected
B. Account previously written off is collected
C. Specific uncollectible account is written off
D. Account previously written off becomes collectible
Answer: C

Drills and Quizzers

41. When the allowance method of recognizing bad debt expense is used, the journal entry to record the write-off of a
specific uncollectible account would decrease
A. Net income
B. Working capital
C. Allowance for doubtful accounts
D. Net realizable value of accounts receivable
Answer: C
42. An entity uses the allowance method for recognizing doubtful accounts. The journal entry to record the writeoff of a
specific uncollectible account
A. Affects neither net income nor working capital
B. Decreases both net income and working capital
C. Affects neither net income nor accounts receivable
D. Decreases both net income and accounts receivable
Answer: A
43. When the allowance method of recognizing doubtful accounts is used, the entry to record the write-off of a specific
account would
A. Increase both accounts receivable and the allowance for doubtful accounts
B. Decrease both accounts receivable and the allowance for doubtful accounts
C. Decrease accounts receivable and increase allowance for doubtful accounts
D. Increase accounts receivable and decrease the allowance for doubtful accounts
Answer: B
44. A debit balance in the allowance for doubtful accounts

A. Should never occur.
B. May occur before the end-of-period adjustment for uncollectible accounts.
C. May exist even after the end-of-period adjustment for uncollectible accounts.
D.Is always the result of management not providing a large enough allowance in order to manage earnings.
Answer: B
45. The estimate of uncollectible accounts receivable based on a percentage of sales

Drills and Quizzers
A. Is only acceptable for tax purposes.

B. Emphasizes measurement of total assets.
C. Emphasizes measurement of bad debt expense.
D. Emphasizes measurement of the net realizable value of accounts receivable.
Answer: C
46. The advantage of relating an entity's bad debt experience to accounts receivable is that this approach
A. Relates bad debt expense to the period of sale.
B. Makes estimates of uncollectible accounts unnecessary.
C. Is the only generally accepted method for measuring accounts receivable.
D. Gives a reasonably accurate measurement of receivables in the statement of financial position.
Answer: D
47. A method of estimating uncollectible accounts that emphasizes asset valuation rather than income measurement is
the allowance method based on
A. Gross sales
B. Direct writeoff
C. Aging the receivables
D. Credit sales less returns and allowances
Answer: C
48. When an accounts receivable aging schedule is prepared, a series of computations is made to determine the
estimated uncollectible accounts. The resulting amount from this aging schedule
A. Is the amount of doubtful accounts expense for the year
B. Is the amount of desired credit balance of the allowance for doubtful accounts to be reported at year-end
C. Is the amount that should be added to the beginning allowance for doubtful accounts to get the doubtful accounts
expense for the year
D. When added to the total accounts written off during the year is the desired credit balance of the allowance for
doubtful accounts at year-end
Answer: B
49. When the allowance method of recognizing bad debt expense is used, the entry to record the writeoff of a specific
uncollectible account would decrease
A. Net income
B. Working capital

Drills and Quizzers

Answer: C
50. When the allowance method of recognizing uncollectible accounts is used, the entry to record the writeoff of a
specific account would
A. Decrease both accounts receivable and net income.
B. Increase the allowance for uncollectible accounts and decrease net income.
C. Decrease both accounts receivable and the allowance for Uncollectible accounts.
D. Decrease accounts receivable and increase the allowance for uncollectible accounts.
Answer: C
51. The entry debiting accounts receivable and crediting allowance for doubtful accounts would be made when
A. A customer defaults on its account.
B. A customer pays its account balance.
C. Estimated uncollectible receivables are too low.
D. A previously defaulted customer pays its outstanding balance.
Answer: D
52. When the allowance method of recognizing bad debt expense is used, the entry to record the writeoff of a specific
uncollectible account would decrease
A. Net income
B. Working capital
Answer: C
53. When the allowance method of recognizing uncollectible accounts is used, the entry to record the writeoff of a
specific account would
A. Decrease both accounts receivable and net income.
B. Increase the allowance for uncollectible accounts and decrease net income.
C. Decrease both accounts receivable and the allowance for Uncollectible accounts.
D. Decrease accounts receivable and increase the allowance for uncollectible accounts.
Answer: C

Drills and Quizzers

54. The entry debiting accounts receivable and crediting allowance for doubtful accounts would be made when
A. A customer defaults on its account.
B. A customer pays its account balance.
C. Estimated uncollectible receivables are too low.
D. A previously defaulted customer pays its outstanding balance.
Answer: D
Level of Difficulty: Moderatesx
55. An entity uses the allowance method to recognize doubtful accounts expense. What is the effect of a collection of
an account previously written off?
A. No effect on both allowance for doubtful accounts and doubtful accounts expense
B. Increase in allowance for doubtful accounts and no effect on doubtful accounts expense
C. Increase in allowance for doubtful accounts and decrease in doubtful accounts expense
D. No effect on allowance for doubtful accounts and decrease in doubtful accounts expense
Answer: B
56. Of the methods to record cash discounts related to accounts receivable, which is more theoretically correct?
A. Net method
B. Gross method
C. Allowance method
D. All three methods are theoretically correct
Answer: A
57. Which of the following statements is incorrect regarding how the impairment assessment is to be performed?
A. Any accounts receivable not individually assessed should be collectively assessed for impairment.
B. Not individually significant accounts receivable should be assessed individually and if impaired, the
impairment loss is recognized.
C. Individually significant accounts receivable should be considered for impairment separately and if impaired,
the impairment loss is recognized.
D. Any account receivable individually assessed that is not considered impaired should be included with a group
of assets with similar credit-risk characteristics and collectively assessed for impairment.
Answer: B

Drills and Quizzers
58. Trade receivables are classified as current assets if they are reasonably expected to be collected
A. Within one year.
B. Within the normal operating cycle.
C. Within one year or within the operating cycle, whichever is longer.
D. Within one year or within the operating cycle, whichever is shorter.
Answer: C
Topic: Presentation and Disclosure
59. An operating cycle

a. is twelve months or less in length.
b. is the average time required for a company to collect its receivables.
c. is used to determine current assets when the operating cycle is longer than one year.
d. begins with inventory and ends with cash.
Answer: C
60. What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a
balance sheet?
a. As offsets to capital.
b. By means of footnotes only.
c. As assets but separately from other receivables.
d. As trade notes and accounts receivable if they otherwise qualify as current assets.
Answer: C
Source: Intermediate Accounting by Kieso
61. Which of the following is incorrect?

a. The operating cycle always is one year in duration.
b. The operating cycle sometimes is longer than one year in duration.
c. The operating cycle sometimes is shorter than one year in duration.
d. The operating cycle is a concept applicable both to manufacturing and retailing enterprises.
Answer: A
62. Where the operating cycle extends beyond one year because of normal credit terms as in the case of installment
sales of household appliances
A. The receivables are not recognized.
B. The entire receivables are shown as noncurrent assets.
C. The portion due in one year is shown as current and the balance as noncurrent.

Drills and Quizzers
D. It is proper to classify the entire receivables as current assets with disclosure of the amount not realizable
within one year, if material.
Answer: D
63. Nontrade receivables are classified as current assets only if they are reasonably expected to be realized in cash
A. Within the normal operating cycle.
B. Within one year, the length of the operating cycle notwithstanding
C. Within one year or within the operating cycle, whichever is longer.
D. Within one year or within the operating cycle, whichever is shorter.
Answer: B
64. 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 shown as noncurrent.
B. Only the portion currently due is shown as current and the balance as noncurrent.
C. The entire receivables are shown as current with disclosure of the amount not currently due.
D. The entire receivables are shown as current without disclosure of the amount not currently due.
Answer: B
65. All of the following are required when classifying receivables, except
A. Disclose any receivables pledged as collateral.
B. Indicate the receivables classified as current and noncurrent.
C. Disclose all significant concentrations of credit risk arising from receivables.
D. All of these are required
Answer: D
66. Which of the following receivables would not be classified as an "other receivable”?
a. Advance to an employee
b. Interest receivable
c. Refundable income tax
d. Notes receivable
Answer: D

Drills and Quizzers
67. Which of the following statements is false?

A. Sales returns and allowances is always treated as a contra-revenue.
B. Sales returns and allowances, sales discounts and credit card discounts are always treated as selling expenses.
C. Credit card discounts and sales discounts can be treated as contra-revenue accounts or as selling expenses.
D. Sales discounts are used to encourage early payment by customers.
Answer: B
67. In relation to receivables, an entity is required by PFRSs to

a. Classify receivables as current and non-current in the statement of financial position.
b. Disclose any receivables pledged as collateral.
c. Disclose all significant concentrations of credit risk arising from receivables.
d. All of these.
Answer: D
Part II – Problems
1. A Company provided some information on their financial records on December 31, 2020:
Accounts receivable, January 1 P1,920,000
Collections of account receivable 6,240,000
Bad debts 200,000
Inventory, January 1 2,880,000
Inventory, December 31 2,640,000
Accounts payable, January 1 1,000,000
Accounts payable, December 31 1,500,000
Cash sales 1,200,000
Purchases 4,800,000
Gross Profit on Sales 2,160,000
What is the ending balance of accounts receivable on December 31, 2020?
a. P1,680,000 c. P3,120,000
b. P2,880,000 d. P4,080,000
Answer: A
Inventory, January 1 P2,880,000
Purchases 4,800,000
Total goods available for sale P7,680,000
Less: Inventory, December 31 2,640,000
Cost of Sales P5,040,000
Add: Gross Profit 2,160,000
Total Sales P7,200,000
Less: Cash Sales 1,200.000
Sales on Account P6,000,000
Add: Account Receivable, January 1 1,920,000
Total P7,920,000

Drills and Quizzers
Less: Collections of Account Receivable 6,240,000

Account Receivable, December 31 P1,680,000
Topic: Balance of Accounts Receivable
Level of Difficulty: Difficult
Source: Practical Accounting 1 by Conrado Uberita
2. A Corporation had the following information relating to its accounts receivable:

Accounts receivable, December 31, 2019 P1,950,000
Credit sales for 2020, 8,100,000
Collections from customers for 2020 7,125,000
Accounts written off, August 30, 2020 187,500
Estimated uncollectible receivables per aging of
Receivables, December 31, 2020 247,500
In the December 31, 2020 statement of financial position, what is the amortized cost of the receivable?
a. P2,490,000 c. P2,775,000
b. P2,737,500 d. P2,925,000
Answer: A
Add: Credit sales 8,100,000
Total P10,050,000
Less: Collection from customers P7,125,000
Accounts written off 187,500 7,312,500
Less: Estimated uncollectible accounts 247,500
Amortized cost (expected net cash inflow) P2,490,000
3. The following data were taken from the records of A Corporation for the year ended December 31, 2021:
Sales on account, P7,200,000; Account receivables written off as a result of permanent impairment, P50,000; Notes
receivable to settle accounts, P800,000; Purchases on account, P7,800,000; Payments to creditors, P6,400,000;
Purchase discounts, P520,000; Sales returns, P30,000; Collections received to settle accounts, P4,900,000; Notes
given to settle accounts, P500,000; Purchase returns, P140,000; Payments of notes, P200,000; Discounts taken by
customers, P80,000; Collection on notes receivable, P360,000.
What is the carrying value of the accounts receivable on December 31, 2021?
a. P1,210,000 c. P1,650,000
b. P1,340,000 d. P1,780,000
Answer: B
Schedule 1:
Sales P7,200,000
Less: Credits to Account Receivable
Collection P4,900,000
Sales discount 80,000
Accounts written-off 50,000
Notes receivable in settlement of acct. 800,000
Sales returns 30,000 5,860,000

Drills and Quizzers

For the next 3 items

December 31, 2020, the accounts receivable control account of A Company had a balance of P2,865,000. An analysis
of the accounts receivable account showed the following:
Accounts known to be worthless P 37,500

Advance payments to creditors on purchase orders 150,000
Advances to affiliated companies 375,000
Customers’ accounts reporting credit balances arising from sales return
(225,000)
Interest receivable on bonds 150,000
Other trade accounts receivable – unassigned 750,000
Subscriptions receivable for common stock due in 30 days 825,000
Trade accounts receivable - assigned 375,000
Trade installment receivable due 1 – 18 months, including unearned finance charges
of P30,000 330,000
Trade receivables from officers due currently 22,500
Trade accounts on which post-dated checks are held (no entries were made on
receipts of checks) 75,000
P2,865,000
Questions:
4. The trade accounts receivable as of December 31, 2020 is
a. P1,147,500 c. P1,485,000
b. P1,522,500 d. P1,447,500
Answer: B
Other trade accounts receivable – unassigned P 750,000
Trade accounts receivable - assigned 375,000
Trade installment receivable due 1 – 18 months, net of unearned finance
charges of P30,000 300,000
Trade receivables from officers due currently 22,500
Trade accounts on which post-dated checks are held 75,000
Trade accounts receivable P1,522,500
5. The current trade and other receivables net as of December 31, 2020 is
a. P2,647,500 c. P2,272,500
b. P2,610,000 d. P1,822,500
Answer: A
Trade accounts receivable (see no. 4) P1,522,500
Subscriptions receivable, due in 30 days 825,000
Current trade and other receivables P2,647,500
6. How much of the foregoing will be presented under noncurrent assets as of December 31, 2020?

Drills and Quizzers
a. P1,200,000 c. P525,000
b. P 375,000 d. P 0
Answer: B
Advances to affiliated companies P375,000
Note: Advances to affiliated companies are normally presented under noncurrent assets.
Topic: Gross Receivables
Source: CPAR CPA Exam Review
7. On December 31,2020, A Company revealed a balance of P8,200,000 in the accounts receivable control account.
An analysis of the accounts receivable showed the following:
Accounts known to be worthless 100,000
Advances to affiliated companies 1,000,000
Customers' accounts reporting credit balances arising from sales returns(600,000)
Trade accounts receivable - unassigned 2,000,000
Subscription receivable due in 30 days ' 2,200,000
Trade accounts receivable - assigned (A
Company's equity in assigned accounts is P500,000) 1,500,000
Trade installments receivable due 1-18 months,
including unearned finance charge of P50,000 850,000
Trade accounts receivable from officers, due currently 150,000
Trade accounts on which postdated checks are held
(no entries were made on receipt of checks) 200,000
Total 8,200,000
What amount should be reported as trade accounts receivable on December 31,2020?
A. 4,050,000 C. 4,650,000
B. 4,150,000 D. 4,700,000
Answer: C
Accounts receivable - unassigned 2,000,000
Accounts receivable - assigned 1,500,000
Trade installments receivable (850,000 - 50,000) 800,000
Accounts receivable from officers 150,000
Accounts on which postdated checks are held 200,000
Total trade accounts receivable 4,650,000
8. On December 31, 2020, the "Receivables" account of A Company shows an amortized cost of P1,950,000.
Subsidiary details show the following:
Trade accounts receivable, P775,000; Trade notes receivable, P100,000; installments receivable, normally due one
(1) year to two (2) years, P300,000; Customers' accounts reporting credit balances arising from sales returns,
P30,000; Advance payments for purchase of merchandise, P150,000; Customers' accounts reporting credit balances
arising from advance payments, P20,000; Cash advances to subsidiary, P400,000, Claims from insurance company,
P15,000; Subscription receivable due in 60 days, P300,000; Accrued interest receivable, P10,000.
How much should be presented as "trade and other receivables" under current assets?
a. P725,000 c. P1,290,000

Drills and Quizzers
b. P1,125,000 d. P1,650,000
Answer: D
Trade accounts receivable P 775,000
Trade notes receivable 100,000
Installments receivable 300,000
Advance payments 150,000
Claims from insurance company 15,000
Subscription receivable 300,000
Accrued interest receivable 10.000
Trade & other receivables P1,650,000
• Customers' accounts with credit balances arising from (a) sales returns; and (b) advance payments shall be
classified as current liabilities.
• Advances to subsidiary shall be presented as non-current asset.
9. On the December 31, 2020 balance sheet of A Company, the current receivables consisted of the following:
Trade accounts receivable P232,500
Allowance for uncollectible accounts ( 5,000)
Claim against shipper for goods lost in transit (Oct. 2021) 7,500
Selling price of unsold goods sent by
Microwave to consignee 65,000
Security deposit on lease of warehouse used for
storing inventories 75,000
Total P 375,000
At December 31, 2020, how much should be A's total current net receivables?
a. P235,000 c. P310,000
b. P300,000 d. P375,000
Amswer: A
Trade accounts receivable P232,500
Allowance for uncollectible accounts ( 5,000)
Claim receivable 7,500
Total current net receivables P235,000
The security deposit is a non-current receivable and should be shown as non-current asset.
Topic: Net Receivable
10. A Company has the following account balances at year-end:

Accounts receivable P80,000
Allowance for doubtful accounts 4,800
Sales discounts 3,200
A should report accounts receivable at a net amount of
a.P72,000.
b. P75,200.
c. P76,800.

Drills and Quizzers
d. P80,000.
Answer: B
P80,000 – P4,800 = P75,200.
Topic: Net Accounts Receivable
11. The following information relates to A Company's accounts receivable for 2022:
Accounts receivable, January 1, 2022 P975,000
Credit sales for 2022 4,050,000
Sales returns for 2022 112,500
Impairment of receivable 2022 60,000
Collections from customers during 2022 3,225,000
Estimated future sales returns at December 31, 2022 75,000
Estimated sales discounts accounts at December 31, 2022 25,000
What amount should A report for accounts receivable at December 31, 2015 statement of financial position?
a. P1,527,500 c. P1,627,500
b. P1,627,500 d. P1,800,000
Answer: A
Accounts receivable, January 1 P 975,000
Credit sales 4,050,000 P5,025,000
Less: Credits to Receivables
Impairment 60,000
Collections 3,225,000
Sales returns 112,500 3,397,500
Accounts receivable, Dec.31, 2022 P1,627,500
Less: Estimated future returns 75,000
Estimated future discounts 25,000 100.000
Amortized cost (expected net cash inflow) P1,527,500
12. A Company provided the following data relating to accounts receivable for 2021:
Accounts receivable, January 1 650,000
Credit sales 2,700,000
Sales returns 75,000
Accounts written off 40,000
Collections from customers 2,150,000
Estimated future sales returns at December 31 50,000
Estimated uncollectible accounts at 12/31 per aging 110,000
What amount should be reported as net realizable value of accounts receivable on December 31, 2021?
A. 925,000 C. 1,125,000
B. 1,085,000 D. 1,200,000
Answer: A
Accounts receivable. - January 650,000
Credit sales 2,700,000
Total 3,350,000

Drills and Quizzers
Less: Collections from customers 2,150,000

Accounts receivable - December 31 1,085,000
The net realizable value of accounts receivable is computed as follows:
Accounts receivable 1,085,000
Less: Allowance for doubtful accounts 110,000
Allowance for sales returns 50,000 160,000
Net realizable value 925,000
13. A Corp. sells to wholesalers on terms of 2/15, n/30. A has no cash sales but 50% of A's customers take
advantage of the discount. A uses the gross method of recording sales and trade receivables. An analysis of A's trade
receivables balances at December 31, 2020 revealed the following:
Age Amount Collectibility
0-15 days P300,000 100%
16-30 days 180,000 95%
31-60 days 15,000 90%
Over 60 days 7,500 P1,500
P502.500
In its December 31, 2020 statement of financial position, what amount should A report for allowance for discounts?
a. P3,000 c. P5,025
b. P4,860 d. P6,000
Answer: A
Allowance for discount P300,000 x 50% x 2% = P3,000
Only receivables aged 0-15 days are eligible for the discount. The discount is determined using 50% of the peso
value eligible for the discount.
Topic: Allowance for discounts
14. On May 9, 2022, A Corp. sold merchandise with a list price of P150,000 to B on account. A allowed trade discounts
of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made F.O.B. shipping point. A prepaid P6,000 of
delivery costs for B as an accommodation.
What amount should B remit to A as full payment on May 24, 2020?
a. P82,320 c. P88,320
b. P88,200 d. P94,200
Answer: C
Invoice price (P150,000 x 70% x 80%) P84,000
Less: Cash discount (P84,000 x 2%) 1,680
Net P82,320
Add: Freight cost-reimbursable against the buyer 6,000
Remittance P88,320
If the term of the contract of sale is FOB Shipping Point, title passes to the buyer with the loading of goods at the
point of shipment. With the passing of title on the point of shipment, the cost of transporting the goods is now the
responsibility of the buyer, and if the seller was prepaying the freight cost, the said freight cost is reimbursable
against the buyer.

Drills and Quizzers
Topic: Sales with Credit & freight terms

15. On June 1, 2022, A Corp. sold merchandise with a list price of P300,000 to B Company on account. B was
given the following trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made F.O.B.
point of destination. On June 10, 2022, when the merchandise were delivered, B Company paid P5,000 of delivery
costs for A as an accommodation. What amount should B Company remit to A Company as full payment on June
14, 2022?
a. P168,000 c. P159,740
b. P164,640 d. P159,640
Answer: D
Invoice price (P300,000 x 70% x 80%) P168,000
Less: Cash discount (P168,000 x 2%) . 3.360
Net P164,640
Less: Freight cost -reimbursable against the seller 5.000
Remittance P159,640
The term of the sales contract is FOB (free on board) Destination, legal title does not pass until the buyer receives the
goods. Without the passing of title, implicit in the contract of sale is that cost of transferring the goods to the point of
destination is to be borne by the seller. Any freight cost then that was paid by the buyer in favor of the seller is a
deductible amount when final settlement is made.
Topic: Sales with Credit & freight terms
16. A, Inc. had sales of P1,000,000 during December, year 2. Experience has shown that merchandise equaling 7% of
sales will be returned within thirty days and an additional 3% will be returned within ninety days. Returned
merchandise is readily resalable. In addition, merchandise equaling 15% of sales will be exchanged for merchandise of
equal or greater value. What amount should A report for net sales in its income statement for the month of December
year 2?
a. P900,000
b. P850,000
c. P780,000
d. P750,000
Answer: A
When revenue is recognized from sales and a right of return exists, sales revenue must be reduced to reflect estimated
returns. In this case, sales of P1,000,000 must be reduced by estimated returns of P100,000 [(7% + 3%) ×
P1,000,000], resulting in net sales of P900,000. The estimated exchanges (15%) will not result in a future reduction of
sales.
Source: CPA Exam Review by Wiley
17. A Corp. sold merchandise to various customers with a list price of P1,000,000. The customers were given trade
discounts of 20% and 15%. Credit terms were 2/10, n/30. Based on experience, A expects that 50% will avail of the
cash discounts and 10% will return the products. In accordance with PFRS 15, A should recognize revenue of
a. P680,000 c. P605,200
b. P673,200 d. P598,400

Drills and Quizzers
Answer: C
Invoice Price (P1,000,000 x 0.80 x 0.85) P680,000
Cash discount expected to be availed (680,000 x 0.50 x 0.02) (6,800)
Refund Liability (680,000 x 0.10) (68,000)
Sales Revenue P605,200
18. A Corporation sold P21,000 of merchandise during the month of December, which was charged to a national credit
card. On December 15, A bills the independent national credit card company for these sales and is assessed a 5%
service charge. On December 21, a customer returned merchandise originally sold for P2,000 and A notifies the credit
card company of the return. On December 29, the credit card company remitted amount owed to A. Which statement
is incorrect?
a. In recording this sale, A should record an account receivable from the credit card company.
b. A received P18,050 from the credit card company.
c. A should recognize P18,050 as net revenue.
Answer: C
19. A Company used the allowance method of accounting for uncollectible accounts. During 2020, the entity had
charged P800,000 to bad debt expense, and wrote off accounts receivable of P900,000 as uncollectible. What was the
decrease in working capital?
A. 0 C. 800,000
B. 100,000 D. 900,000
Answer: C
Only the bad debt expense decreases working capital. The writeoff does not affect anymore the working capital
because the effect is offsetting.
Topic: Allowance method – in general
20. A Company used the statement of financial position approach in estimating uncollectible accounts expense. The
entity prepared an adjusting entry to recognize this expense at the end of the year. During the year, the entity wrote off
a P100,000 receivable and made no recovery of previous writeoff. After the adjusting entry for the" year, the credit
balance in the allowance for doubtful accounts was P250,000 larger than it was on January 1. What amount of
uncollectible account expense was recorded for the year?
A. 100,000 C. 250,000
B. 150,000 D. 350,000
Answer: D
Writeoff 100,000
Excess of ending allowance over beginning allowance 250,000
Uncollectible accounts expense 350,000

Drills and Quizzers

21. At the close of its first year of operations, December 31, 2022, A Company had accounts receivable of P540,000,
after deducting the related allowance for doubtful accounts. During 2022, the company had charges to bad debt
expense of P90,000 and wrote off, as uncollectible, accounts receivable of P40,000. What should the company report
on its balance sheet at December 31, 2022, as accounts receivable before the allowance for doubtful accounts?
a. P670,000
b. P590,000
c. P490,000
d. P440,000
Answer: A
P540,000 + (P90,000 – P40,000) = P590,000.
22. Before year-end adjusting entries, A Company's account balances at December 31, 2022, 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. P582,500.
b. P537,500.
c. P492,500.
d. P555,000.
Answer: b
P600,000 – P62,500 = P537,500.
23. During the year, A Company made an entry to write off a P4,000 uncollectible account. Before this entry was
made, the balance in accounts receivable was P50,000 and the balance in the allowance account was P4,500. The net
realizable value of accounts receivable after the write-off entry was
a. P50,000.
b. P49,500.
c. P41,500.
d. P45,500.
Answer: D
(P50,000 – P4,000) – (P4,500 – P4,000) = P45,500.
24. At year-end, A Company reported net sales of P7,100,000 and allowance for doubtful accounts with debit balance
of P16,000 before adjustment. The entity estimated the uncollectible accounts receivable at 2% of net sales. What is
the allowance for doubtful accounts at year-end?
A. 126,000 C. 144,500

Drills and Quizzers
B. 142,000 D. 158,000
Answer: A.
Allowance for doubtful accounts (debit balance) ( 16,000)
Doubtful accounts expense (7,100,000 x 2%) 142,000
Allowance for doubtful accounts, December 31 126,000
Topic: Percent of sales method
25. A Company provided the following data for the current year:
Allowance for doubtful accounts - January 1 180,000
Sales 9,500,000
Sales returns and allowances 800,000
Sales discounts 200,000
Accounts written off as uncollectible 200,000
The entity provided for doubtful accounts expense at the rate of 3% of net sales. What is the allowance for doubtful
accounts at year-end?
A. 235,000 C. 265,000
B. 241,000 D. 435,000
Answer: A
Allowance for doubtful accounts - January 1 180,000
Doubtful accounts expense (9,500,000-800,000-200,000 x 3%)255,000
Total 435,000
Accounts written off (200,000)
Allowance for doubtful accounts - December 31 235,000
Under the percentage of sales method, the amount computed represents the doubtful accounts expense.

A Company sells directly to retail customers. On January 1, 2022, the balance of the accounts receivable was
P2,070,000 while the allowance for doubtful accounts was a credit of P78,000. The following data are gathered:
Credit sales Writeoffs Recoveries
2019 11,100,000 260,000 22,000
2020 12,250,000 295,000 37,000
2021 14,650,000 300,000 36,000
2022 15,000,000 310,000 42,000
Doubtful accounts are provided for as a percentage of credit sales. The entity calculated the percentage annually by
using the experience of the three years prior to the current year.
26. What is the percentage of credit sales to be used in computing doubtful accounts expense for 2022?
A. Two percent C. Six percent
B. Four percent D. Eight percent
Answer: A.
Credit sales Writeoffs Recoveries
2019 11,100,000 260,000 22,000
2020 12,250,000 295,000 37,000

Drills and Quizzers
2021 14,650,000 300,000 36,000

38,000,000 855,000 95,000
Rate = 855,000 – 95,000 =.02
27. What amount should be reported as doubtful accounts expense for 2022?
A. 222,000 C. 310,000
B. 300,000 D. 378,000
Answer: B.
Doubtful accounts expense for 2022 (2%x 15,000,000) 300,000
28. What amount should be reported as allowance for doubtful accounts on December 31, 2022?
A. 110,000 C. 378,000
B. 300,000 D. 478,000
Answer: A
Allowance for doubtful accounts - 1/1/2022 78,000
Doubtful accounts expense for 2022 300,000
Recoveries in 2022 42,000
Total 420,000
Write-offs in 2022 (310,000)
Allowance for doubtful accounts- 12/31/2022 110,000
29. A Corporation's had a specific receivable from a customer in the amount of P600,000 as of December 31,
2021. During 2022, the customer informed A Corporation that servicing of its payable will be made once there is
significant improvement in their financial capabilities. Since there are no available historical data relating to similar
borrowers, A Corporation uses its experienced judgment to estimate the amount of impairment loss. Reasonable
estimate revealed that the fair value of the receivable as of December 31, 2022 represents 40% of the outstanding
receivable. What amount of impairment loss on its receivable should A report for 2022?
a. None c. P360,000
b. P240,000 d. P600,000
Answer: C
Account receivable P 600,000
x Percent of impairment 60%
Impairment loss P 360,000
Topic: Percent of accounts receivable method

On December 31, 2022, general ledger of A Company's account receivable showed a balance of P1,100,000. Because
of continuing decrease in expected cash flows on its financial assets, A Company has decided to estimate the cash
flows of the outstanding receivables. The estimates are based on the expected peso amount to be received on the
outstanding receivables; the category (age) which also includes the length and period of collectability and time factor
for similar borrowers.

Drills and Quizzers
Category Amount Time Factor

A P400,000 .909
B 300,000 .826
C 250,000 .751
D 150,000 .683
30. How much should A Company report its account receivable in its December 31, 2022 statement of financial
position?
a. P799,150 c. P1,200,000
b. P901,600 d. P1,400,000
Answer: B
Category Amount Time Factor Amortized Cost
A P 400,000 .909 P363,600
B 300,000 .826 247,800
C 250,000 .751 187,750
D 150,000 .683 102,450
Total P1,100,000 P901,600
31. What amount of loss impairment on receivable should A Company recognize in its December 31, 2022 statement of
comprehensive income?
a. P198,400 c. P300,850
b. P300,000 d. P498,400
Answer: B
Balance of account receivable P1,100,000
Less: Amortized cost of account receivable 901,600
Loss on impairment P 498,400
32. A Corp. has the following data relating to accounts receivable for the year ended December 31, 2020:
Accounts receivable, January 1, 2020 P480,000
Allowance for doubtful accounts, January 1, 2020 19,200
Sales during the year, all on account, terms 2/10, 1/15, n/60 2,400,000
Cash received from customers during the year 2,560,000
Accounts written off during the year 17,600
An analysis of cash received from customers during the year revealed that P1,411,200 was received from customers
availing the 10-day discount period, P792,000 from customers availing the 15-day discount period, P4,800 represented
recovery of accounts written-off, and the balance was received from customers paying beyond the discount period. The
allowance for doubtful accounts is adjusted so that it represents certain percentage of the outstanding accounts
receivable at year end. The required percentage at December 31, 2020 is 125% of the rate used on December 31,
2019.
The doubtful accounts expense for 2020 is

a. P6,880 c. P8,720
b. P7,120 d. P8,960
Answer: B
Solution

Drills and Quizzers
Accounts receivable, Beg P480,000

Credit Sales 2,400,000
Collection (P2,560,000 x (2,596,800)
36,800)
Recovery 4,800
Write off (17,600)
Accounts receivable, End P270,400
Rate 0.05
Allowance for Doubtful Accounts, End P13,520
Allowance for Doubtful Accounts, Beg (19,200)
Recovery (4,800)
Write off 17,600
Doubtful Accounts Expense - 2020 P7,120

A trial balance before adjustments included the following:
Debit Credit
Sales P425,000
Sales returns and allowance P14,000
Accounts receivable 43,000
Allowance for doubtful accounts 760
33. If the estimate of uncollectibles is made by taking 2% of net sales, the amount of the adjustment is
a. P6,700.
b. P8,220.
c. P8,500.
d. P9,740.
Answer: B
(P425,000 – P14,000) × .02 = P8,220.
34. If the estimate of uncollectibles is made by taking 10% of gross account receivables, the amount of the adjustment
is
a. P3,540.
b. P4,300.
c. P4,224.
d. P5,060.
Answer: A
(P43,000 × .10) – P760 = P3,540.
Topic: Percent of sales & Percent of accounts receivable method
35. A Company, a wholesaler, uses the aging method to estimate bad debt loss/impairment loss. The following
schedule of aged accounts receivable was prepared at December 31, 2022:
Age of Accounts Amount Ave. % of Uncollectibles
0-30 days P561,600 .48%

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31-60 days 196,100 1.04%

61-90 days 88,400 10.40%
91-120 days 18,500 50.70%
Over 120 days 9,600 78.12%
Total P874.200
What is the amount of impairment loss based on the average loss experience for the last 5 years?
a. P30,490 c. P60,590
b. P30,810 d. P63,286
Answer: B
A/R Ave. % of Impairment
Balance Uncollectibles loss
0-30 P561,600 .48% P 2,696
31-60 196,100 1.04% 2,040
61-90 88,400 10.40% 9,194
91-120 18,500 50.70% 9,380
Over 120 9,600 78.12% 7,500
P30,810
36. A Company used the allowance method of accounting for bad debts. The following summary schedule was
prepared from an aging of accounts receivable outstanding on December 31 of the current year:
Number of days Probability
outstanding Amount of collection
0-30 days 5,000,000 .98
31 -60 days 2,000,000 .90
Over 60 days 1,000,000 .80
The following additional information is available for the current year:
Net credit sales for the year 40,000,000
Allowance for doubtful accounts:
Balance, January 1 450,000 (cr)
Balance before adjustment, December 31 20,000 (dr)
The entity based the estimate of doubtful accounts on the aging of accounts receivable. What amount should be
recognized as doubtful accounts expense for the current year?
A. 470,000 C. 500,000
B. 480,000 D. 520,000
Answer: D
0-30 days (5,000,000 x 2%) 100,000
31 - 60 days (2,000,000 x 10%) 200,000
Over 60 days (1,000,000 x 20%) 200,000
Required allowance - December 31 500,000
Add: Debit balance in allowance 20,000
Doubtful accounts expense 520,000
37. A Company began operations on January 1, 2020. On December 31,2020, the entity provided for uncollectible

Drills and Quizzers
accounts based on 1% of annual credit sales.

On January 1,2021, the entity changed the method of determining the allowance for uncollectible accounts by applying
certain percentages to the accounts receivable aging as follows:
Days past invoice date Percent uncollectible
0- 30 1
31 - 90 5
91 - 180 20
Over 180 80
In addition, the entity wrote off all accounts receivable that were over 1 year old. The following additional information
related to the years ended December 31,2021 and 2020:
2021 2020
Credit sales 3,000,000 2,800,000
Collections, including recovery 2,915,000 2,400,000
Accounts written off 27,000 none
Recovery of accounts previously written off 7,000 none
Days past invoice date at December 31
0- 30 300,000 250,000
31 - 90 80,000 90,000
91 - 180 60,000 45,000
Over 180 25,000 15,000
What is the amount of uncollectible accounts expense for 2021?
A. 11,000 C. 38,000
B. 31,000 D. 39,000
Answer: B.
0- 30 (300,000 x 1%) 3,000
31 - 90 (80,000 x 5%) 4,000
91 - 180 (60,000 x 20%) 12,000
Over 180 (25,000 x 80%) 20,000
Required allowance - December 31, 2021 39,000
Allowance-December 31, 2020 (2,800,000 x 1%) 28,000

Recovery in 2021 7,000
Uncollectible accounts expense for 2021 (SQUEEZE) 31,000
Total 66,000
Write-off in 2021 (27,000)

From inception of operations, A Company provided for uncollectible accounts expense under the allowance method,
provisions were made monthly at 2% of credit sales, bad debts written off were charged to the allowance account,
recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to
the allowance account were made.
The usual credit terms are net 30 days. The allowance for doubtful accounts was P120,000 on January 1, 2020.
During the current year, credit sales totaled P9,000,000, interim provisions for doubtful accounts were made at 2% of
credit sales, P90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to

Drills and Quizzers
P15,000.
The entity prepared an aging of accounts receivable for the first time on December 31,2020.
Classification Balance Uncollectible
November - December 2,000,000 2%
July - October 600,000 10%
January - June 400,000 25%
Prior to January 1,2020 200,000 75%
3,200,000
Based on the review of collectibility of the account balances in the "prior to January 1, 2020" aging category, additional
accounts totaling P60,000 are to be written off on December 31, 2020.
Effective with the year ended December 31, 2020, the entity adopted a new accounting method for estimating the
allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.
38. What is the required allowance for doubtful accounts on December 31,2020?
A. 305,000 C. 425,000
B. 350,000 D. 470,000
Answer: A
November - December (2,000,000 x 2%) 40,000
July-October (600,000 x 10%) 60,000
January - June (400,000 x 25%) 100,000
Prior to January 1,2020 ( 200,000 - 60,000 x 75%) 105,000
39. What amount was recorded as doubtful accounts expense for 2020?
A. 90,000 C. 270,000
B. 180,000 D. 300,000
Answer: B
Recorded doubtful accounts expense (2% x 9,000,000) 180,000
40. What amount should be reported as doubtful accounts expense in the income statement for 2020?
A. 180,000 C. 260,000
B. 185,000 D. 320,000
Answer: D
Allowance for doubtful accounts - January 1, 2020 120,000
Recoveries 15,000
Doubtful accounts expense (SQUEEZE) 320,000
Total 455,000
Writeoffs (90,000 + 60,000) (150,000)
41. What is the year-end adjustment to the allowance for doubtful accounts on December 31, 2020?
A. 140,000 C. 305,000
B. 180,000 D. 320,000
Answer: A

Drills and Quizzers
Correct doubtful accounts expense 320,000

Recorded amount (2% x 9,000,000) 180,000
Increase in doubtful accounts expense 140,000
The year-end adjustment to recognize the increase in doubtful accounts expense is as follows:
Doubtful accounts 140,000
42. The balances of selected accounts taken from the December 31, 2020 of A Company are shown below:
Accounts receivable P674,000
The following transactions (in summary) affecting accounts receivable occurred during the year ended December 31,
2021:
Sales (all on account, terms, 2/10,1/15, n/60) P 3,000,000
Cash received from customers 3,200,000
The cash received includes the following:
Customers paying w/in the 10-day discount period P 1,764,000
Customers paying w/in the 15-day discount period 990,000
Recovery of accounts written off 6,000
Customers paying beyond the discount period ?
Accounts receivable written off as worthless 22,000
Credit memo for sales returns 12,000
It is the company's policy to provide for uncollectible accounts equal to 1% of sales. How much is the carrying value of
the accounts receivable as of December 31, 2021?
a. P362,000 c. P400,000
b. P368,000 d. P406,000
Answer: A
Accounts receivable, December 31, 2021 (Schedule 1) P400,000
Less: Required allowance (Schedule 2) 38,000
Carrying value of accounts receivable P362,000
Schedule 1:
Accounts receivable, December 31, 2020 P 674,000
Sales on account 3,000,000
Recovery of accounts written off 6,000 ,
Total debits to Accounts receivable P3,680,000
Less: Credits to Accounts receivable
Collections (including recovery) P3,200,000
Sales discount (Schedule A) 46,000
Accounts receivable, December 31, 2021 P 400,000
Schedule A:
Sales discount at 2% (P1,764,000 / 98% x 2%) P36,000
Sales discount at 1% (P 990,000 / 99% x 1%) 10,000
Total discount P46,000

Drills and Quizzers
Schedule 2:
Allowance for bad debts, December 31, 2020 P24,000
Add: Provision (1% x P3,000,000) 30,000
Recovery of accounts written off 6,000
Total credits to Allowance for uncollectible accounts P60,000
Less: Accounts written off 22,000
Required Allowance, December 31, 2021 P38,000
Topic: Changes in Receivable Account

FAR Accounts-Receivables Drills-Quizzers Final

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FAR Accounts-Receivables Drills-Quizzers Final

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Subject Code: Subject Description

Drills and Quizzers

SUBJECT CODE: SUBJECT DESCRIPTION

1. Which statement is incorrect regarding PFRS 15?

This document is the property of PHINMA EDUCATION 1

4. Performance obligation is a promise in a contract with

This document is the property of PHINMA EDUCATION 2

9. Which statement is incorrect regarding recognition of revenue?

10. Which of the following statements is true?

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13. In accordance with PFRS 15, a receivable is

14. The term "receivables" includes all

15. Which of the following statements is incorrect regarding receivables?

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A. Receivables are financial assets.

This document is the property of PHINMA EDUCATION 5

Topic: Initial Measurement

20. Accounts receivable shall be recognized initially at

22.Credit terms of 2/10, n/30 indicate that a

This document is the property of PHINMA EDUCATION 6

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30. Which statement is incorrect regarding a refund liability?

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Source: FAR Review by Rey Ocampo

32. The impairment requirement in PFRS 9 is based on:

33. In applying PFRS 9 impairment requirements, an entity needs to follow:

This document is the property of PHINMA EDUCATION 9

A. Charging bad debts as accounts are written off as uncollectible

This document is the property of PHINMA EDUCATION 10

Level of Difficulty: Easy

44. A debit balance in the allowance for doubtful accounts

45. The estimate of uncollectible accounts receivable based on a percentage of sales

This document is the property of PHINMA EDUCATION 11

A. Is only acceptable for tax purposes.

This document is the property of PHINMA EDUCATION 12

C. Allowance for doubtful accounts

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Topic: Subsequent Measurement

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59. An operating cycle

61. Which of the following is incorrect?

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67. Which of the following statements is false?

67. In relation to receivables, an entity is required by PFRSs to

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Less: Collections of Account Receivable 6,240,000

2. A Corporation had the following information relating to its accounts receivable:

This document is the property of PHINMA EDUCATION 18

Level of Difficulty: Difficult

For the next 3 items

Accounts known to be worthless P 37,500

This document is the property of PHINMA EDUCATION 19

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10. A Company has the following account balances at year-end:

This document is the property of PHINMA EDUCATION 21

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Less: Collections from customers 2,150,000

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Topic: Sales with Credit & freight terms

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Level of Difficulty: Easy