Far Eastern University

Institute of Accounts. Business and Finance

Department of Accountancy and Internal Auditing

INTERMEDIATE ACCOUNTING 1
RECEIVABLES
DO-IT-YOURSELF (MULTIPLE CHOICE QUESTIONS)

Name Date
(Family Name) (First Name) (Middle Name) Day/Time
Professo
r Score
Section Rating
Stud. No. Remarks

MCQ 2.2-1
THEORY (15 Points)

Instructions:
Select the best answer among the given choices. Write your answer on the space provided before each number. Use
only CAPITAL LETTERS.

1. The accounts receivable balance consists of a debit balance of P 12,000 from Juan and a credit
balance of P 2,000 from Peter. What is the Accounts Receivable balance to be reported in the
Statement of Financial Position?
A. P 10,000
B. P 14,000
C. P 12,000
D. P 8,000

2. Using the same information in number (6), what amount is to be reported as current liability?
A. P 10,000
B. P 2,000
C. P 12,000
D. P 0

3. Using the same information in number (1), if the general ledger balance of Accounts Receivable
is P 10,000, what would be the necessary adjusting journal entry?
A. Debit – Accounts Receivable, P 2,000; Credit – Customers’ Account with Credit Balances, P
2,000.
B. Debit – Accounts Receivable, P 2,000; Credit – Allowance for Doubtful Accounts, P 2,000.
C. Debit – Customers’ Account with Credit Balances, P 2,000; Credit – Accounts Receivable, P
2,000.
D. No adjusting journal entry is necessary.

4. Using the same information in number (1), if the ledger balance of Accounts Receivable is P
12,000, what would be the necessary adjusting journal entry?
A. Debit – Accounts Receivable, P 2,000; Credit – Customers’ Account with Credit Balances, P
2,000.
B. Debit – Accounts Receivable, P 2,000; Credit – Allowance for Doubtful Accounts, P 2,000.
C. Debit – Customers’ Account with Credit Balances, P 2,000; Credit – Accounts Receivable, P
2,000.
D. No adjusting journal entry is necessary.

5. Goods were sent to SM Stores under consignment contract at billed price of P 100,000. Which
of the following is correct?
A. The accounts receivable must be debited for P 100,000
B. The accounts receivable must be credited for P 100,000
C. The Consignment Receivable account must be debited for P 100,000.
D. No receivable account is to be recognized.

6. The recovery of accounts previously written off would

I. Increase the allowance for doubtful accounts
II. Have no effect on accounts receivable
III. Decrease the net realizable value of accounts receivable

A. I and II only
B. I, II and III
C. II and III only
D. III only

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

7. Using the allowance method of accounting for doubtful accounts, if a collection is made on
account previously written off as uncollectible,
A. Recharge the customer’s account first with the amount collected and then record its
collection.
B. Record only its collection without recharging the customer’s account with the amount
collected.
C. Recharge the customer’s account and simultaneously recognized income.
D. Record the collection by debiting cash and crediting income.

8. Which is correct regarding the Direct Write-off method of accounting for doubtful accounts?
I. It recognized loss on accounts receivable when the account is proved to be worthless
or uncollectible.
II. It used the account Allowance for Doubtful Accounts.
III. This is acceptable for financial accounting purposes.
IV. It properly reports accounts receivable at net realizable value.

A. I and II only
B. I, II and III only
C. I, II, III and IV
D. I only

9. Which is correct regarding Allowance Method of accounting for doubtful accounts?

I. It recognized losses on accounts receivable if there is doubtful of collection.
II. It used the account Allowance for Doubtful Accounts
III. This is acceptable for tax purposes.
IV. It properly reports accounts receivable at net realizable value.

A. I and II only
B. I, II, III and IV
C. I, II and IV only
D. II and IV only

10. Which of the following statements is correct?

I. The difference between the face value of noninterest-bearing notes receivable and its
present value is the unearned interest income.
II. The difference between the face value of noninterest-bearing long-term notes
receivable and Unearned Interest Income is called the carrying amount of notes
receivable.
III. The prevailing market rate is the effective interest rate used in accounting for
noninterest-bearing long-term notes receivable.

A. I and II only
B. I, II and III
C. II and III only
D. I and III only

11. Which of the following is NOT an objective evidence of impairment of a financial asset?
A. Significant financial difficulty of the issuer or obligor.
B. A decline in the fair value of the asset below its previous carrying amount.
C. A breach of contract, such as a default or delinquency in interest payment or principal
payment.
D. The lender, for economic or legal reason relating to the borrower’s financial difficulty, grants
to the borrower a concession that the lender would not otherwise consider.

12. If there is evidence that an impairment loss on loan receivable has been incurred, the loss is
equal to the
A. Excess of the carrying amount of the loan receivable over the present value of the cash
flows related to the loan.
B. Excess of the of cash flows related to the loan over the carrying amount of the loan
receivable.
C. Excess of the carrying amount of the loan over the principal amount of the loan.
D. Excess of the principal amount of the loan over its carrying amount.

13. Which statement is incorrect regarding the general approach of applying the impairment
requirements of PFRS 9?
A. At each reporting date, an entity recognizes a loss allowance based in either 12-months
ECLs or lifetime ECLs depending on whether there has been a significant increase in credit
risk on the financial instrument since initial recognition.
B. If the credit risk increases significantly and the resulting credit quality is not considered to be
low credit risk, full lifetime expected credit losses are recognized.
C. When the entity has no reasonable expectations of recovering the financial asset, then the

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

gross carrying amount of the financial asset should be directly reduced in its entirety.
D. Increases in the loss allowance balance are recognized in profit or losses as an impairment
loss but decreases are not recognized.

14. The practice of realizing cash from trade receivables prior to maturity date is widespread. Which
term is not associated with this practice?
A. Hypothecation
B. Factoring
C. Defalcation
D. Discounting

15. When the accounts receivable are sold outright, the accounts receivable have been
A. Pledged
B. Assigned
C. Factored
D. Collateralized

MCQ 2.2-2
PROBLEMS (20 Points)

Instructions:
Select the best answer among the given choices. Write your answer on the space provided before each number. Use
only CAPITAL LETTERS.

1. AG Inc. made a P10,000 sale on account with the following terms: 1/15, n/30. If the company uses
the net method to record sales made on credit, how much should be recorded as sales revenue?
A. P 9,800.
B. P 9,900.
C. P 10,000.
D. P 10,100.

2. Vivian, Inc had net sales in 2020 of P 700,000. At December 31, 2020, before adjusting entries, the
balances in selected accounts were: accounts receivable P 125,000 debit, and allowance for doubtful
accounts P 1,200 credit. Vivian estimates that 2% of its net sales will prove to be uncollectable. What
is the cash realizable value of the receivables reported on the statement of financial position at
December 31, 2020?
A. P 112,200
B. P 122,500
C. P 111,000
D. P 109,800

3. Wellington Corp. has outstanding accounts receivable totaling P 2.54 million as of December 31 and
sales on credit during the year of P 12.8 million. There is also a debit balance of P 6,000 in the
allowance for doubtful accounts. If the company estimates that 1% of its net credit sales will be
uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end
adjustment to record bad debt expense?
A. P 25,400.
B. P 31,400.
C. P 122,000.
D. P 134,000

4. Wellington Corp. has outstanding accounts receivable totaling P3 million as of December 31 and
sales on credit during the year of P 15 million. There is also a debit balance of P 12,000 in the
allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables will
be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end
adjustment to record bad debt expense?
A. P 1,200,000.
B. P 228,000.
C. P 240,000.
D. P 252,000.

5. On December 31, 2010, Flint Corporation sold for P 75,000 an old machine having an original cost of
P 135,000 and a book value of P 60,000. The terms of the sale were as follows:
 P 15,000 down payment
 P 30,000 payable on December 31 each of the next two years

The agreement of sale made no mention of interest; however, 9% would be a fair rate for this type of
transaction. What should be the amount of the notes receivable net of the unamortized discount on
December 31, 2010 rounded to the nearest dollar? (The present value of an ordinary annuity of 1 at
9% for 2 years is 1.75911.)
A. P 52,773.

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 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

B. P 67,773.
C. P 60,000.
D. P 105,546.

6. Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a list price of P
800,000 to Arch Inc. Arch Inc. will pay P 850,000 in one year. Royal Palm Corp. normally sells this
type of equipment for 90% of list price. How much should be recorded as revenue?
A. P 720,000.
B. P 765,000.
C. P 800,000.
D. P 850,000.

7. Equestrain Roads sold P 50,000 of goods and accepted the customer's P 50,000 10% 1-year note
receivable in exchange. Assuming 10% approximates the market rate of return, what would be the
debit in this journal entry to record the sale?
A. No journal entry until cash is collected.
B. Debit Notes Receivable for P 50,000.
C. Debit Accounts Receivable for P 50,000.
D. Debit Notes Receivable for P 45,000.

8. Sun Inc. factors P 2,000,000 of its accounts receivables without guarantee (recourse) for a finance
charge of 5%. The finance company retains an amount equal to 10% of the accounts receivable for
possible adjustments. What would be recorded as a gain (loss) on the transfer of receivables?
A. Loss of $100,000.
B. Gain of $100,000.
C. Loss of $300,000.
D. Loss of $200,000.

9. Maxwell Corporation factored, with guarantee (recourse), P 100,000 of accounts receivable with
Huskie Financing. The finance charge is 3%, and 5% was retained to cover sales discounts, sales
returns, and sales allowances. What amount of cash would Maxwell receive on the sale of
receivables?
A. P 97,000.
B. P 95,000.
C. P 92,000.
D. P 100,000

10. Geary Co. assigned P 400,000 of accounts receivable to Kwik Finance Co. as security for a loan of p
335,000. Kwik charged a 2% commission on the amount of the loan; the interest rate on the note
was 10%. During the first month, Geary collected P 110,000 on assigned accounts after deducting P
380 of discounts. Geary accepted returns worth p 1,350 and wrote off assigned accounts totaling p
2,980.

The amount of cash Geary received from Kwik at the time of the transfer was
A. P 301,500.
B. P 327,000.
C. P 328,300.
D. P 335,000.

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