Quiz VIII – Accounts Receivable (Part VIII)

Read carefully, and answer the following with your big brain:

1. For the year ended December 31, 2016, Jet Co. estimated its allowance for uncollectible accounts using the year-
end aging of accounts receivable. The following data are available: Allowance for uncollectible accounts, 1/1/16
P84,000
Provision for uncollectible accounts during 2016
(2% on credit sales of P3,000,000) 60,000
Uncollectible accounts written off, 11/30/16 69,000
Estimated uncollectible accounts per aging, 12/31/16 104,000
After year-end adjustment, the uncollectible accounts expense for 2016 should be

a. P69,000 b. P60,000 c. P104,000 d. P89,000

ANSWER = D
Solution: Allowance for uncollectible accounts, end. P104,000
Allowance for uncollectible accounts, beg. 84,000
Write-offs (69,000)
Uncollectible accounts expense P 89,000

2. Accounts receivable in the amount of P500,000 were assigned to the Fast Finance Company by Marsh, Inc., as
security for a loan of P400,000. The finance company charged a 4% commission on the face amount of the loan, and the
note bears interest at 9% per year. During the first month, Marsh collected P260,000 on assigned accounts. This amount
was remitted to the finance company along with one month's interest on the note. How much cash did Marsh Inc.
receive with the transfer of accounts receivable?
a. 480,000 b. 384,000 c. 348,000 d. 260,000
ANSWER = B
Solution: Loans receivable P400,000
Finance fee (P400,000 x 4%) (16,000)
Cash received P 384,000
The accounts receivable of Harry Company were stated at P1,467,000 in a balance sheet submitted to a banker for
credit. The asset was found to consist of the following items:
Due from customers on open account P 1,125,000
Acknowledged claim for damages 22,500
Due from consignee at billed price – cost price
being P22,500 30,000
Investment in and advances to affiliated company 150,000
Loans to officers and employees 13,500
Deposits with municipalities – bids for contracts 67,500
Unpaid capital stock subscriptions 60,000
 Advances to creditors for merchandise purchased
but not received 24,000
Cash advanced to salesmen for traveling expenses 4,500
Allowance for doubtful accounts ( 30,000)
P 1,467,000

The amount of P1,125,000 due from customers was the remaining balance after deducting accounts with credit
balances of P6,000. During your examination, you noted that on December 31, the company assigned P300,000 of
customers’ accounts to secure a 17%, P240,000 note payable. A 1% commission based on the accounts assigned was
charged and deducted from the cash received. The client recorded this transaction by a debit to cash and a credit to
notes payable.

3. How much is the Accounts Receivable (gross) balance at December 31?

a. P 759,000 b. P 789,000 c. P 1,101,000 d. P 1,131,000

ANSWER = D

4. The total current non-trade receivable balance at December 31 is:

a. P 64,500 b. P 96,000 c. P 120,000 d. P 192,000

ANSWER = A

5. The liability for the accounts receivable – assigned is:

a. P 237,000 b. P 240,000 c. P 243,000 d. P 300,000

ANSWER = B

6. The total non-trade receivable balance at December 31 is:

a. P 342,000 b. P 318,000 c. P 313,500 d. P 245,000

ANSWER = A
Solutions:
Unadjusted Accounts Receivable P1,467,000
Acknowledged claim for damages (22,500)
Due from consignee at billed price – cost price being (30,000)
Investment in and advances to affiliated company (150,000)
Loans to officers and employees (13,500)
Deposits with municipalities – bids for contracts (67,500)
Unpaid capital stock subscriptions (60,000)
Advances to creditors for merchandise purchased
but not received (24,000)
Cash advanced to salesmen for traveling expenses (4,500)
Allowance for doubtful accounts 30,000
Credit balances 6,000
Accounts Receivable, gross balance P 1,131,000 (1)

Claims Receivable P 22,500 Note Payable P240,000 (3)

Advances to officers and employees 18,000 Assigned P300,000 customer’s account.
Advances to suppliers 24,000
Current non-trade AR P 64,500 (2)

Claims Receivable P22,500

Advances to affiliates 150,000
Advances to officers and employees 18,000
Deposit for contracts 67,500
Subscription receivable 60,000
Advances to suppliers 24,000
Total non-trade receivable P342,000 (4)