UNIVERSITY OF CALOOCAN CITY

SOUTH CAMPUS

Conceptual Framework and Accounting Standards April, 2021

Module 04: Trade Accounts Receivable Instructor: John Bo S. Cayetano

1) Noreen Company provided the following information for 2020:

Accounts receivable – January 1 2,000,000
Credit sales 10,000,000
Collection from customers, excluding the recovery of accounts written off 8,000,000
Accounts written off 100,000
Sales returns 500,000
Recovery of accounts written off 50,000
Estimated future sales returns on December 31 150,000
Estimated uncollectible accounts on December 31 per aging 300,000

What is the “amortized cost” of accounts receivable on December 31, 2020?

A. 3,400,000 B. 3,100,000 C. 2,950,000 D. 2,900,000

2) On December 31, 2017, Sunmi Company has an outstanding accounts receivable balance of P130,000,000
broken down into: 0-60 days outstanding, P50,000,000; 61-120 days outstanding, P40,000,000; 121-365
days outstanding, P30,000,000; over one year outstanding, P10,000,000. Estimated uncollectible accounts
are 2%, 5%, 10% and 25% respectively. During the current year, Sunmi wrote off P2,500,000 of accounts
receivable and recovered P500,000 from accounts previously written off in prior years. On December 31,
2016, Sunmi had an allowance for doubtful accounts of P5,000,000. What amount should be reported as
doubtful accounts expense for the year ended December 31, 2017?
A. 5,500,000 B. 8,500,000 C. 4,500,000 D. 3,000,000

3) On January 1, 2020 Elisha Company reported Accounts Receivable of P1,300,000, net of allowance for bad
debts of P126,000. During the year, Sales (all on credit) amounted to P4,400,000. Collections from
customers including recoveries of P24,000 totaled P4,550,000 net of discounts amounting to P147,000.
Likewise, P9,000 of receivables were written-off.

Elisha Company uses the aging method in determining bad debts, although Elisha Company provides interim
bad debts provision equal to 0.5% of net credit sales.

The following table shows the corresponding bad debt percentage of Elisha Company’s accounts receivable:
Age AR balance Percentage of Uncollectability
45 days or less 45% 5%
46 – 90 days 30% 10%
over 90 days 25% 15%

The required allowance for bad debts at December 31, 2020 is

A. 91,620 B. 102,960 C. 105,120 D. 116,190

4) Erd and Kim Company operates in an industry that has a high rate of bad debts. On December 31, 2023,
before any year-end adjustments, the accounts receivable balance was P20,000,000 and its allowance for
doubtful accounts balance was P1,500,000. The year-end balance reported for the allowance for doubtful
accounts is based on the following schedule:
Accounts Percent
Time Outstanding Receivable Uncollectible
Under 30 days P 10,000,000 5%
31 – 180 days 5,000,000 10%
181 – 360 days 3,000,000 30%
More than one year 2,000,000 100%

The accounts which have been outstanding for more than one year and 100% uncollectible would be written
off immediately. What should be the doubtful accounts expense for the year ended December 31, 2023?
A. 3,900,000 B. 2,400,000 C. 2,000,000 D. 1,900,000

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5) Based on the information:
Credit sales 1,720,000
Collections on accounts receivable during the year 1,700,000
Cash sales 8,100,000
Unadjusted balance in Allowance for doubtful accounts 500 debit
Sales returns and allowances for credit sales 40,000
Accounts receivable, beginning of the year 140,000

If bad debts are estimated to be 1½ of ending accounts receivable, in the adjusting entry to recognize bad
debts, you would debit bad debt expense for:
A. 2,300 B. 1,900 C. 1,300 D. 1,800

6) Brotherhood Company had the following information relating to its accounts receivable:
Accounts receivable, 12/31/21 1,300,000
Credit sales for 2022 5,400,000
Collections from customers for 2022, excluding recovery 4,750,000
Accounts written off 9/30/22 125,000
Collection of accounts written off in prior year (customer credit was not 25,000
reestablished)
Estimated uncollectible receivable per aging of receivable at 12/31/22 165,000
On December 31, 2022, the amortized cost of accounts receivable is
a. 1,825,000 c. 1,635,000
b. 1,800,000 d. 1,660,000

7) Based on its past collection experience, JSC Company provides for bad debt at the rate of 2 percent of net
credit sales. On January 1, 2021, the allowance for doubtful accounts credit balance was P10,000.

During 2021, JSC wrote off P18,000 of uncollectible receivables and recovered P5,000 on accounts written
off in prior years. If net credit sales for 2021 totaled P1,000,000, the doubtful accounts expense for 2021
should be
a. 17,000 c. 23,000
b. 20,000 d. 35,000

8) Scout Company estimates the allowance for uncollectible accounts at 3% of the ending balance of accounts
receivable. During 2020, Scout’s credit sales and collections were P125,000 and P131,000, respectively.

What was the balance of accounts receivable on January 1, 2020, if P180 in accounts receivable were written
off during 2020 and if the allowance account had a balance of P750 on December 31, 2020?
a. 5,820 c. 31,180
b. 31,000 d. 25,000

9) Noreen Company provided the following information for 2020:

Accounts receivable – January 1 2,000,000

Credit sales 10,000,000
Collection from customers, excluding the recovery of accounts written off 8,000,000
Accounts written off 100,000
Sales returns 500,000
Recovery of accounts written off 50,000
Estimated future sales returns on December 31 150,000
Estimated uncollectible accounts on December 31 per aging 300,000

What is the “amortized cost” of accounts receivable on December 31, 2020?

a. 3,400,000 c. 2,950,000
b. 3,100,000 d. 2,900,000

10) Maps Inc. prepared an aging of its accounts receivable at December 31, 2020 and determined that the
amortized carrying amount of the receivables was P250,000. Additional information is available as follows:

Allowance for bad debts at 1/1/2020 – credit balance 28,000

Accounts written off as uncollectible during 2020 23,000
Accounts receivable at 12/31/2020 270,000
Uncollectible accounts recovered during 2020 5,000

For the year ended December 31, 2020, Maps’ bad debts expense would be
a. 10,000 c. 20,000
b. 15,000 d. 23,000

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