NATIONAL UNIVERSITY

College of Business and Accountancy

BAFACR12X- Intermediate Accounting 1&2
QUIZ 2
45
Name: __________________________________________________________ Section: _______________ Score:

1. In accounting for sales discounts whether taken or not, regardless of the method used, the bottom line figure in
the statement of comprehensive income of the seller would always be the same.

Answer: TRUE

2. When a sales discount is taken by the customer, the gross profit under the different methods in accounting for
cash discounts will be the same.

Answer: TRUE

3. When a sales discount is not taken and the seller company uses the net method to account for its cash discounts,
the gross profit will be the same even under the gross method.

Answer: FALSE

4. If the allowance method is used to account for the sales discount, and the company issued a credit memorandum
due to sales returns, the entry will include a credit to allowance for sales discounts equivalent to the discount
pertaining to the sales returns.

Answer: FALSE

5. Sales discounts forfeited is reported as other operating income in the profit or loss section of the statement of
comprehensive income.

Answer: TRUE

6. Regardless of the method used in accounting for cash discounts, the amortized cost of the accounts receivable
reported in the statement of financial position would still be the same.

Answer: TRUE

7. Which of the following is a trade receivable?

a. Subscription receivable
b. Loans to employees
c. Receivables from affiliates
d. Amounts due from customers

Answer: D

8. For banks and financial instutions, receivables arise from

a. Loans
b. Deposits
c. Credit sales
d. Withdrawals

Answer: A

9. When specific customer's account is written off by a company using the allowance method, the effect on profit is
it will decrease and there is no effect in the amortized cost of accounts receivable.

Answer: FALSE

10. When an account previously written off last year is subsequently recovered and collected during the current year,
the transaction would

a. increase profit, under the direct write off method

b. increase profit under the allowance method
c. decrease profit under the direct method
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 d. increase net accounts receivable under the allowance method

Answer: A

11. A company uses the allowance method to recognize uncollectible accounts expense. What is the effect of an
account previously written off when this accounts are recovered on the following?
a. Allowance for uncollectible accounts - No effect ; Accounts receivable - No effect
b. Allowance for uncollectible accounts - Increase ; Accounts receivable - No effect
c. Allowance for uncollectible accounts - Decrease ; Accounts receivable - No effect
d. Allowance for uncollectible accounts -Decrease ; Accounts receivable – Decrease

Answer : B

12. ACT 195 Company prepares an accounts receivable aging schedule with a series of computations as follows:

2% of the total peso balance of accounts from 1-60 days past due;
5% of the total peso balance of accounts from 61-120 days past due and so on

How would you describe the total amount determined in this series of computations?

a. It is the amount of bad debts expense for the year.

b. It is the amount of that should be added to the allowance for bad debts at year end.
c. When added to the total of the accounts written off during the year, this new sum is the desired credit balance
of the allowance account.
d. It is the amount of the desired credit balance of the allowance for bad debts to be reported in the year-end
financial statements.

Answer : D

13. A company who is directly linked with the credit card company considers their credit card sales as cash sales.

Answer : TRUE

14. Companies who have credit card sales normally are charge with credit card service charge and this charges are
normally netted against the total amount to be received from the credit card companies.

Answer : TRUE

15. ABC Company is a car dealer and offers installment payment methods to its customers. On January 1,2020, a car
is sold at P 1,500,0000 which is to be paid in 3 equal installments every Dec 31. On December 31,2020, how will
ABC Company present its receivable relating to the sale on January 1,2020?

a. Current - 1,500,000 ; Non- current - 0 with proper disclosure regarding the amount to be paid beyond one year
from the reporting period.
b. Current - 500,000 ; Non -current - 500,000
c. Current - 500,000 ; Non -current – 0
d. Current - 1,500,000 ; Non -current – 0

Answer : A

16. On December 1,2019, ABC Company sold merchandise on credit with a list price of P 105,000 and a trade discount
of 10%. Terms were 2/10, n/30, FOB Shipping point, freight collect. Freight costs is P 3,000.

Using the net price method, what is the amount that should be debited to the accounts receivable at initial
recognition?

Answer : 92,610

17. On December 1,2019, ABC Company sold merchandise on credit with a list price of P 105,000 and a trade discount
of 10%. Terms were 2/10, n/30, FOB Shipping point, freight collect. Freight costs is P 3,000.

Using the allowance method, what is the amount that should be debited to the accounts receivable at initial
recognition?

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 Answer : 94,500

18. On December 1,2019, ABC Company sold merchandise on credit with a list price of P 105,000 and a trade discount
of 10%. Terms were 2/10, n/30, FOB Shipping point, freight collect. Freight costs is P 3,000.

On December 8,2019, there's a P 5,000 sales returns.

Using the net price method, what is the amount that would be received from the customer if it pays on December
11,2019?

Answer : 87,710

19. On December 1,2019, ABC Company sold merchandise on credit with a list price of P 105,000 and a trade discount
of 10%. Terms were 2/10, n/30, FOB Shipping point, freight collect. Freight costs is P 3,000.

On December 8,2019, there's a P 5,000 sales returns.

Using the allowance method, what is the amount that would be debited to the allowance for sales discount
account on December 8,2019?

Answer : 100

20. On December 25,2019, ABC Company sold merchandise on credit with a list price of P 105,000 and a trade discount
of 10%. Terms were 2/10, n/30, FOB Destination, freight collect. Freight costs is P 3,000.

On December 28,2019, there's a P 5,000 sales returns.

Using the gross method, what is the amount that should be debited to the accounts receivable at initial
recognition?

Answer : 91,500

21. On December 25,2019, ABC Company sold merchandise on credit with a list price of P 105,000 and a trade discount
of 10%. Terms were 2/10, n/30, FOB Destination, freight collect. Freight costs is P 3,000.

On December 28,2019, there's a P 5,000 sales returns.

Using the gross method, on December 31,2019, what is the amount that should be debited to the sales discount
account as part of the adjustment?

Answer : 1,790

22. December 1,2019, ABC Company sold merchandise on credit with a list price of P 105,000 and a trade discount of
10%. Terms were 2/10, n/30, FOB Destination, freight collect. Freight costs is P 3,000.

On December 11,2019, there's a P 5,000 sales returns.

Using the net method, what is the amount that should be debited to the sales discount forfeited account if the
customer paid on December 15,2019?

Answer : 1,790

ABC Company completes the following transactions relating to its credit card sales:

• July 1,2019 - P 500,000 sales charge by customers to their BDO credit cards.

• September 25, 2019 - P 200,000 sales charge by customers to their BPI credit cards.

• December 2, 2019 - P 100,000 sales charge by customers to their Eastwest credit cards.

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 • December 31,2019 - Deposits are made by BPI and Eastwest bank to the account of ABC Company for credit card
sales, net of 2% service charge: BPI - 196,000 ; Eastwest - 73,500.

• January 5, 2020 - P 250,000 sales charge by customers to their Eastwest credit cards. On the same day Eastwest bank
deposited the remaining balance from the credit card sales last year.

• March 1,2020 - P 50,000 sales charge by customers to their BDO credit cards.

*Credit card receipts charged to BDO are credited directly to ABC, net of 2% service charge.

23. How much is the credit card service charge for the year 2019? Answer : 16,000
24. How much is the credit card service charge for the year 2020? Answer : 6,000
25. How much is the total cash collected from the credit card companies for the year 2020? Answer : 73,500

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