4

MULTIPLE CHOICE – PROBLEMS

. TRADE AR + CLAIMS (LOST GOODS) – UNCOLLECTIVE
930,000 + 30,000 – 20,000 = 940,000
Instruction: Shade the letter of the correct answer
a. 940,000 c. 1,240,000
b. 1,200,000 d. 1,500,000
1
AR BEGINNING 1,300,000 5
CREDIT SALES 5,400,000 . BEGINNING INV + PURCHASE – ENDING INV = COST OF SALES
LESS: COLLECTION FROM CUSTOMER 4,750,000 4,800,000 + 8,000,000 – 4,400,000 = 8,400,000
WRITTEN OFF 125,000 COST OF SALES + GROSS MARGIN ON SALES = GROSS SALES
8,400,000 + 4,200,000 = 12,600,000
1,825,000 GROSS SALES – CASH SALES = CREDIT SALES
12,600,000 – 2,000,000 = 10,600,000
a. 1,825,000 c. 1,950,000
b. 1,850,000 d. 1,990,000 AR BEGINNING + CREDIT SALES – COLLECTED AR
4,000,000 + 10,600,000 – 8,400,000 = 6,200,000
2
. AR BEGINNING 650,000 a. 2,000,000 c. 6,200,000
CREDIT SALES 2,700,000 b. 4,200,000 d. 8,200,000
LESS: COLLECTION FROM CUS. 2,150,000
WRITTEN OFF 40,000 6
SALES RETURN 75,000 . AR 950,000
AR ENDING 1,085,000 CREDIT SALES 3,800,000
LESS: ESTIMATED SALES RETURN 50,000 TOTAL 4,750,000
ESTIMATED UNCOLLECTIBLE 110,000 LESS:
950,000 CASH RECEIVED FROM CUSTOMER 3,024,000
SALES DISCOUNT 126,000
a. 925,000 c. 1,125,000 AR WRITTEN OFF 50,000
b. 1,085,000 d. 1,200,000 SALES RETURN AND ALLOWANCE 250,000 3,450,000
1,300,000
3
. AR + ACC DEEMED UNCOLLECTIBLE a. 1,220,000 c. 1,300,000
9,000,000 – 640,000 = b. 1,280,000 d. 1,426,000
a. 7,860,000 c. 8,500,000
b. 8,360,000 d. 8,860,000
7 b. Credit of P2,000 d. Credit of P38,000
. BEG. BAD DEBT EXP. + DOUBTFUL EXP. + RECOVERIES – WO = END-
ING ADA 1 A company estimates that P20,000 of its P500,000 of accounts receivable
1 will be uncollectible. Its Allowance for Doubtful Accounts presently has a
BEG. BAD DEBT EXP. 90,000 . debit balance of P3,000. The adjusting entry will include a
DOUBTFUL EXP (3,800,000 – 250,000 – 126,000) X 2% 68,480 _____________________ to Allowance for Doubtful Accounts.
RECOVERIES 80,000 a. Debit of P2,000 c. Debit of P23,000
LESS: WRITTEN OFF 50,000 b. Credit of P2,000 d. Credit of P23,000
ENDING BAD DEBT 188,480
1 A company estimates that P20,000 of its P500,000 of accounts receivable
2 will be uncollectible. Its Allowance for Doubtful Accounts presently has a
. debit balance of P3,000. The adjusting entry will include a
a. 108,480 c. 188,080 _____________________ to Allowance for Doubtful Accounts.
b. 120,000 d. 188,480 a. Debit of P17,000 c. Debit of P23,000
b. Credit of P17,000 d. Credit of P23,000
8
. 1 Use the following information for questions 13 - 17:
DOUBTFUL ACC CREDIT BALANCE 300,000 3 A company is expecting thousands of credit sales transactions each
DOUBTFUL ACC EXPENSE (640,000 – 460,000) 180,000 . week with terms of net 30 days. The company uses the allowance
RECOVER OF BAD DEBTS 120,000 method and it prepares weekly financial statements. It believes that
600,000 0.001 of its credit sales will be uncollectible. The company's credit
sales for its first week of operations are P500,000. The credit sales for
a. 480,000 c. 640,000 its second week are P600,000.
b. 600,000 d. 940,000
The company's bad debts expense for its first week of operations will be
9 A company estimates that P20,000 of its P500,000 of accounts receivable P__________.
. will be uncollectible. Its Allowance for Doubtful Accounts presently has a CREDIT SALES X 0.001
credit balance of P8,000. The adjusting entry will include a 500,000 X 0.001 = 500
___________________ to the Allowance for Doubtful Accounts.
1 The balance in Allowance for Doubtful Accounts at the end of the first week
a. Debit of P12,000 c. Debit of P28,000 4 will likely be P____________.
b. Credit of P12,000 d. Credit of P28,000 . 500

1 A company estimates that P20,000 of its P500,000 of accounts receivable

1 The company's bad debts expense for its second week of operations will be
0 will be uncollectible. Its Allowance for Doubtful Accounts presently has a
5 P___________.
. credit balance of P18,000. The adjusting entry will include a
. CREDIT SALES X 0.001
____________________ to Bad Debts Expense.
600,000 X 0.001 = 600
a. Debit of P2,000 c. Debit of P38,000
1 The amount of accounts receivable that you expect will be written off by the DOUBTFUL ACC (COMES FROM UNCOLLECTIVE) 100,000
6 end of the company's second week of operations is P___________. TOTAL UNCOLLECTIVE 430,000
. -0- LESS: WRITTEN OFF 230,000
200,000
1 The balance in Allowance for Doubtful Accounts at the end of the second
7 week of operations will likely be P_____________.
. 1ST WEEK ADA + 2ND WEEK ADA
500 + 600 = 1100 a. 100,000 c. 200,000
b. 150,000 d. 230,000
1 Which account should be debited for P1,800 when writing off the account?
8 a. Allowance for doubtful accounts 2 Referring to No. 22, For the year ended December 31, 2010, Anne’s uncol-
. b. Accounts receivable 3 lectible account expense would be
c. Bad debt expense . 280,000 – (230,000 – 50,000) = 100,000

1 Which account should be credited for P1,800 when writing off the account? a. 100,000 c. 200,000
9 a. Allowance for doubtful accounts b. 150,000 d. 230,000
. b. Accounts receivable
c. Bad debt expense 2 An analysis and aging of Aljur Company’s accounts receivable at December
4 31, 2010 disclosed the following: Accounts receivable – P9,000,000, Allow-
2 Assuming that after the account is written off, the supplier receives full pay- . ance for doubtful accounts per book – P500,000, Accounts deemed uncol-
0 ment from the customer. Which account will not be involved in the account- lectible – P640,000. At December 31, 2010, the net realizable value of ac-
. ing entries made at the time when the payment is received? counts receivable should be
a. Allowance for doubtful accounts a. 7,860,000 c. 8,500,000
b. Accounts receivable b. 8,360,000 d. 8,860,000
c. Bad debt expense
2
2 Under the direct write off method, which account is debited when a company 5 DETERMINING MATURITY VALUE
1 writes off one of its accounts receivable? . 500,000 + (500,000 X 8%) = 540,000
. a. Allowance for doubtful accounts
b. Accounts receivable DETERMINING THE DISCOUNT
c. Bad debt expense MATURITY VALUE X RATE X REMAINING TERM
REMAINING TERM 12 – 6 = 6
2 BEG. ALLOW. FOR UNCO. – (WRITTEN OFF UNCOLLECTIVE – UNCOL- 540,000 X 10% X (6/12) = 27,000
2 LECTIVE RECOVERY)
. 280,000 – (230,000 – 50,000) = 100,000 DETERMINE THE NET PROCEEDS FROM DISCOUNTING
540,000 – 27,000 = 513,000
BEG. UNCOLLECTIVE 280,000
UNCOLLECTIVE (RECOVERY) 50,000 a. 495,238 c. 523,810
 b. 513,000 d. 540,000 3
2 Referring to No. 25, What is the loss on note receivable discounting? 2 6,000,000 + (6,000,000 X 10% X 6/12) = 6,300,000
8 DETERMINE THE CARRYING VALUE OF NOTE RECEIVABLE .
. FACE + ACCRUED INT. 6,300,000 X 12% X 4/12 = 252,000
500,000 + (500,000 X 8% X 6/12) = 520,000
6,300,000 – 252,000 = 6,048,000
DETERMINE THE GAIN OR LOSS ON NOTE DISCOUNTING
PROCEEDS – CARRYING VALUE a. 5,640,000 c. 6,048,000
513,000 – 520,000 = (7,000) b. 5,760,000 d. 6,174,000

3 Referring to No. 32, What is the loss on note receivable discounting?

a. 7,000 c. 20,000 3
b. 12,000 d. 27,000 . 6,000,000 + (6,000,000 X 10% X 2/12) = 6,100,000
2 6,048,000 – 6,100,000 = (52,000)
9 2,000,000 X 10% X 6/12 = 100,000
. a. 252,000 c. 52,000
2,000,000 – 100,000 = 1,900,000 b. 152,000 d. 48,000

3
a. 1,880,000 c. 1,938,000 4 500,000 + (500,000 X 10%) = 550,000
b. 1,900,000 d. 1,940,000 .
550,000 X 12% X 6/12 = 33,000
3
0 1,000,000 + (1,000,000 X 8% X 6/12) = 1,040,000 550,000 – 33,000 = 517,000
.
1,040,000 X 10% X 6/12 = 52,000 a. 484,000 c. 503,500
b. 493,500 d. 517,000
1,040,000 – 52,000 = 988,000
3
a. 1,040,000 c. 988,000 5 DETERMINING MATURITY VALUE
b. 990,000 d. 972,000 . 4,000,000 + (4,000,000 X 12% X 90/360) = 4,120,000

3 Referring to No. 30, What is the loss on note receivable discounting? DETERMINING THE DISCOUNT
1 MATURITY VALUE X RATE X REMAINING TERM
. 1,000,000 + (1,000,000 X 8% X 6/12) = 1,040,000 4,120,000 X 15% X 60/360 = 103,000
998,000 – 1,000,000 = (12,000)
a. 52,000 c. 40,000 DETERMINE THE NET PROCEEDS FROM DISCOUNTING
b. 50,000 d. 12,000 4,120,000 – 103,000 = 4,017,000
 a. 3,965,500 c. 4,103,000 a. 21,000 c. 29,000
b. 4,017,000 d. 4,120,000 b. 25,000 d. 50,000

3 Referring to No. 35, What is the loss on note receivable discounting? 4 Refer to No. 39, What is the amount collected by Jomar from the customer
6 0 on December 31, 2010?
. 4,000,000 + (4,000,000 X 12% X 30/360) = 4,040,000 .
4,017,000 – 4,040,000 = (23,000) MATURITY VALUE + PROTEST FEE
a. 17,000 c. 23,000 2,150,000 + 10,000 = 2,160,000
b. 20,000 d. 40,000
3 2,160,000 + (2,160,000 X 12% X 3/12) = 2,224,800
7 NOTE RECEIVABLE = CONTINGENT LIABILITY
. 2,050,000 a. 2,150,000 c. 2,214,500
a. 0 c. 2,033,333 b. 2,160,000 d. 2,224,800
b. 2,000,000 d. 2,050,000
4
3 1 64,000 ONLY IS THE DOUBTFUL ACC EXPENSE
8 5,000,000 + (5,000,000 X 12% X 90/360) = 5,150,000 .
. a. 14,000 c. 64,000
5,150,000 X 15% X 60/360 = 128,750 b. 50,000 d. 114,000

5,150,000 – 128,750 = 5,021,250 4

5,000,000 + (5,000,000 X 12% X 30/360) = 5,050,000 2 3% X NET SALES = DOUBTFUL EXPENSE
5,021,250 – 5,050,000 = (28,750) .
NET SALES = DOUBTFUL EXPENSE / 3%
a. 50,000 c. 25,000
b. 28,750 d. 21,250 ALLOWANCE FOR BAD DEBT + DOUBTFUL EXP. – WRITTEN OFF =
ENDING ALLOWANCE FOR DOUBTFUL ACCOUNTS
3 ~DERIVE FORMULA~
9 DOUBTFUL EXP = ENDING ADA + WRITTEN OFF – ALLOWANCE BD
. 2,000,000 + (2,000,000 X 10% X 9/12) = 2,150,000 29,550 + 14,500 – 17,800 = 26,250

2,150,000 X 12% X 6/12 = 129,000 NET SALES = 26,250 / 3% = 875,000

2,150,000 – 129,000 = 2,021,000 a. 985,000 c. 593,333.33

b. 875,000 d. 0
2,000,000 + (2,000,000 X 10% X 3/12) = 2,050,000
2,021,000 – 2,050,000 = (29,000)
4 a. 2,500,000 c. 1,700,000
3 b. 1,995,000 d. 1,654,600
. BEGINNING INV. + PURCHASES – ENDING INV. = COST OF SALES 4 Refer to No. 46, what interest income should be reported for 2010?
COST OF SALES + (COST SALES X MARK UP %) = SALES 7
SALES – COLLECTION = ACCOUNTS RECEIVABLE . PRESENT VALUE OF NOTE X 8% = INTEREST INC
1,995,000 X 8% = 159,600
0 + 700,000 – 140,000 = 560,000
560,000 + (560 X 50%) = 840,000 a. 505,000 c. 132,368
840,000 – 400,000 = 440,000 b. 159,600 d. 119,600

a. 160,000 c. 384,000 4
b. 300,000 d. 440,000 8 Principal amount P4000,000
4 . LESS : Direct origination cost 61,500
4 BEG. INV. + PURCHASE – END. INV. = COST OF SALES Origination fee received from borrower 350,000
. COST SALES + (COST SALES X MARK UP %) = SALES 3,711,500
ESTIMATED BAD DEBTS % X SALES = ENDING ADA EXP

0 + 900,000 – 150,000 = 750,000 a. 3,711,500 c. 4,411,500

750,000 + (750,000 X 50%) = 1,125,000 b. 4,000,000 d. 4,650,000
1% X 1,125,000 = 11,250 4 Refer to No. 48, what is the interest income for 2009?
9
a. 7,500.00 c. 8,437.50 . (12% X 3,711,500) + (10% X 4,000,000) = 845,380
b. 7,807.50 d. 11,250.00 845,380 – 400,000 = 445,380

4 a. 400,000 c. 529,380
5 SALES – SALES RETURN = NET SALES b. 445,380 d. 558,000
. NET SALES X 2% = UNCOLLECTIVE RECEIVABLES
UNCOLLECTIVE REC. – ADA PRESENTED (CREDIT BAL.) = ADA 5
0 4,000,000 + (4,000,000 X 12% X90/360) = 4,120,000
7,225,000 – 125,000 = 7,100,000 . 4,120,000 X 15% X 30/360 = 103,000
7,100,000 X 2% = 142,000 4,120,000 + 103,000 = 4,017,000
142,000 – 16,000 = 126,000 a. 4,120,000 c. 4,017,000
a. 16,000 c. 142,000 b. 4,103,000 d. 3,965,000
b. 126,000 d. 158,000

4
6 CASH PRICE X 3.99 = PRESENT VALUE OF NOTE
. 500,000 X 3.99 = 1,995,000