AMV-COLLEGE OF ACCOUNTANCY

CA5105 – INTERMEDIATE ACCOUNTING I

MOCK TEST

1. Under the allowance method of recognizing uncollectible accounts, the entry to

write off an uncollectible account
a) increases the allowance for uncollectible accounts.
b. has no effect on the allowance for uncollectible accounts.
c) has no effect on net income.
d) decreases net income.

2. If a company employs the gross method of recording accounts receivable from

customers, then sales discounts taken should be reported as
a) a deduction from sales in the income statement.
b) an item of "other income and expense" in the income statement.
c) a deduction from accounts receivable in determining the net realizable value
of accounts receivable.
d) sales discounts forfeited in the cost of goods sold section of the income
statement.

3. What is the normal journal entry for recording bad debt expense under the
allowance method?
a) Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
b) Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.
c) Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.
d) Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

4. What is the normal journal entry when writing-off an account as uncollectible

under the allowance method?
a) Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
b) Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.
c) Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.
d) Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

5. Which of the following is included in the normal journal entry to record the
collection of accounts receivable previously written off when using the
allowance method?
a) Debit Allowance for Doubtful Accounts, credit Accounts Receivable.
b) Debit Allowance for Doubtful Accounts, credit Bad Debt Expense.
c) Debit Bad Debt Expense, credit Allowance for Doubtful Accounts.
d) Debit Accounts Receivable, credit Allowance for Doubtful Accounts.

6. Under IFRS, which of the following is not permitted for accounting for material
amounts of uncollectable accounts receivable?
a) Percentage of receivables, allowance method.
b) Percentage of sales, allowance method.
 c) Direct write-off method.
d) All of the choices are acceptable under IFRS.

7. Which of the following does not change the balance in accounts receivable?
a) Bad debt expense adjusting entry
b) return on credit sales
c) collection from customers
d) Write-off

8. When accounts receivable aging schedule is prepared, a series of computations

is made to determine the estimated uncollectible accounts. The resulting
amount from this aging schedule
a) When added to the total accounts written off during the year is the desired
credit balance of the allowance for doubtful accounts at year-end.
b) Is the amount of doubtful accounts expense for the year.
c) Is the amount that should be added to the beginning allowance for doubtful
accounts to get the doubtful accounts expense for the year.
d) Is the amount of desired credit balance of the allowance for doubtful
accounts to be reported at year-end.

9. Receivables from officers, employees or affiliated companies should be reported

in the statement of financial position as
a) current assets if collectible within 12 months.
b) non-current assets only.
c) trade notes and accounts receivable if they otherwise qualify as current
assets.
d) offsets to capital

10. The category “trade receivables” includes

a) advances to officers and employees.
b) income tax refunds receivable.
c) claims against insurance companies for casualties sustained.
d) none of these

11. When a customer purchases merchandise inventory from a business

organization, discount may be given which is designed to induce prompt
payment. Such discount is called
a) cash discount
b) enhancement discount
c) nominal discount
d) trade discount.

12. A proof of cash is a

a) Reconciliation of the cash receipts and payments during the current period,
together with the beginning and ending balances of cash.
b) Proof of company’s liquid position.
c) Reconciliation of the cash receipts and payments during the previous period
together with the beginning and ending balances of cash.
d) Proof of existence of cash deposit in a bank.
13. BACLARAN Company prepared the following bank reconciliation on June 30:
Balance per bank P9,800,000; Deposit in transit P400,000; Outstanding checks
P1,400,000; Balance per book P8,800,000. There were total deposits of
P6,500,000 and charges for disbursements of P9,000,000 for July per bank
statement. All reconciliation items on June 30 cleared the bank on July 31.
Checks outstanding amounted to P1,000,000 and deposits in transit totaled
P1,200,000 on July 31. What is the amount of cash receipts per book in July?
a) P6,500,000
b) P7,300,000
c) P5,700,000
d) P7,900,000

14. EDSA Company which sells nutritious instant lugaw sold 1,000 packs at P1,000
per pack on account with the following terms: 1/15, n/30. If EDSA uses the net
method to record sales made on credit, how much should be recorded as sales
revenue? 990,000

15. LIBERTAD Company made a P100,000 sale on account with the following terms:
1/10, n/30. If LIBERTAD uses the gross method to record sales made on credit,
what is/are the debit(s) in the journal entry to record the sale?
a) Debit Accounts Receivable for P99,000.
b) Debit Accounts Receivable for P99,000 and Sales Discounts for P1,000.
c) Debit Accounts Receivable for P100,000.
d) Debit Accounts Receivable for P100,000 and Sales Discounts for P1,000.

16. GILPUYAT Co. made a P100,000 sale on account with the following terms: 2/10,
n/30. GILPUYAT uses the net method to record sales made on credit. What
is/are the debit(s) in the journal entry to record the sale?
a) Debit Accounts Receivable for P98,000.
b) Debit Accounts Receivable for P98,000 and Sales Discounts for P2,000.
c) Debit Accounts Receivable for P100,000.
d) Debit Accounts Receivable for P100,000 and Sales Discounts for P2,000.

17. VITOCRUZ Inc.had net sales in 2021 of P7,000,000. At December 31, 2021,
before adjusting entries, the balances in selected accounts were: accounts
receivable P1,250,000 debit, and allowance for doubtful accounts P12,000
debit. VITOCRUZ estimates that 2% of its net accounts receivable will prove to
be uncollectable. What is the net realizable value of the receivables reported
on the statement of financial position at December 31, 2021? 1,225,000

18. QUIRINO Corp. has outstanding accounts receivable totaling P6,500,000 as of

December 31 and sales on credit during the year of P24,000,000. There is also
a credit balance of P12,000 in the allowance for doubtful accounts. If the
company estimates that 8% of its outstanding receivables will be uncollectible,
what will be the amount of bad debt expense recognized for the year? 508,000

19. At December 31, 2022, PEDROGIL Co. has outstanding accounts receivable
totaling P3,000,000 and made sales on credit of P15,000,000 during the year.
There is also a debit balance of P12,000 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? 240,000
20. The UN Co.’s account balances before year-end adjusting entries at December
31, 2020, for accounts receivable and the related allowance for uncollectible
accounts were P600,000 and P45,000, respectively. An aging of accounts
receivable indicated that P62,500 of the December 31 receivables are expected
to be uncollectible. The net realizable value of accounts receivable after
adjustment is 537,500

21. On January 1, 2022 CENTRALTERMINAL Co. had a balance in the Allowance for
Doubtful Accounts of P10,000. During 2022, it wrote off P7,200 of accounts and
collected P2,100 on accounts previously written off. The balance in Accounts
Receivable was P200,000 at January 1 and P240,000 at December 31. At
December 31, 2022, the company estimates that 5% of accounts receivable
will prove to be uncollectible. What is Bad Debt Expense for 2022?
a) P2,000.
b) P7,100.
c) P9,200.
d) P12,000.

22. LRT1 Corporation had a January 1, 2022 balance in the Allowance for Doubtful
Accounts of P12,000. During 2022, it wrote off P8,640 of accounts and collected
P2,520 on accounts previously written off. The balance in Accounts Receivable
was P240,000 at January 1 and P288,000 at December 31. At December 31,
2022, LRT1 estimates that 5% of accounts receivable will prove to be
uncollectible. What should LRT1 report as its Allowance for Doubtful Accounts
at December 31, 2022?
a) P5,760.
b) P5,880.
c) P8,280.
d) P14,400.