From inception of operations, Comprehensive Company provided for the uncollectible account expense under the allowance method using the percentage of sales method. No year -end adjustment to the allowance method were made. The balance in the allowance for doubtful accounts was P1,000,000 on January 1, 2020. During the current year, credit sales totaled P20,000,000 interim provisions for doubtful accounts were made at 2% of credit sales, bad debts of P200,000 were written off, and recoveries of accounts previously written off amounted to P50,000. An aging of receivables was made for the first time on December 31, 2020. Uncollectible Aging 0-60 Balance 6,000,000 10% 61-180 2,000,000 1,500,000 20% 30% 181-360 Over 360 500,000 50% Based on the review of collectability of the account balances in the over 360 days aging category, additional accounts totaling to P100,000 are to be written off on December 31, 2020. Effective with the year-ended December 31, 2020, the entity adopted a new accounting method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging of accounts receivable. 29. What is the required allowance for doubtful accounts on December 31, 2020? a. 1,650,000 b. 1,950,000 c. 1,700,000 d. 1,450,000 20 Whot onmount ah. douhtful

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter6: Cash And Receivables
Section: Chapter Questions
Problem 12E: Inferring Accounts Receivable Amounts At the end of 2019, Karras Inc. had a debit balance of 141,120...
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On January 1, 2020, Easy Company reported accounts receivable P2,070,000 and allowance
for doubtful accounts P80,000.
Credit sales
Write offs
Recoveries
From inception of operations, Comprehensive Company provided for the uncollectible
account expense under the allowance method using the percentage of sales method.
2017
11,100,000
12,250,000
14,650,000
15,000,000
260,000
295,000
300,000
310,000
22,000
37,000
36,000
40,000
2018
2019
2020
No year -end adjustment to the allowance method were made. The balance in the allowance
for doubtful accounts was P1,000,000 on January 1, 2020.
The collections from customers during 2020 totaled P14,000,000 excluding recoveries.
During the current year, credit sales totaled P20,000,000 interim provisions for doubtful
accounts were made at 2% of credit sales, bad debts of P200,000 were written off, and
recoveries of accounts previously written off amounted to P50,000.
Doubtful accounts are provided for as a percentage of credit sales.
The entity calculated the percentage annually by using the experience of the three years prior
to the current year
An aging of receivables was made for the first time on December 31, 2020.
33. What amount should be reported as doubtful account expense for 2020?
a. 310,000
b. 378,000
c. 300,000
d. 478,000
Aging
0-60
Balance
Uncollectible
6,000,000
2,000,000
1,500,000
500,000
10%
61-180
20%
181-360
30%
Over 360
50%
34. What amount should be reported as allowance for doubtful account on December 31, 2020?
а. 110,000
b. 300,000
с. 222,000
Based on the review of collectability of the account balances in the over 360 days aging
category, additional accounts totaling to P100,000 are to be written off on December 31, 2020.
d. 378,000
Effective with the year-ended December 31, 2020, the entity adopted a new accounting
method for estimating the allowance for doubtful accounts at the amount indicated by the
year-end aging of accounts receivable.
35. What is the net realizable value of accounts receivable on December 31, 2020?
a. 2,650,000
b. 2,690,000
c. 2,760,000
d. 2,800,000
29. What is the required allowance for doubtful accounts on December 31, 2020?
a. 1,650,000
b. 1,950,000
c. 1,700,000
d. 1,450,000
Sky Company provided the following information at year-end
2019
2020
30. What amount should be reported as doubtful accounts for current year?
a. 1,200,000
b. 1,650,000
880,000
(10,000)
(20,000)
850,000
800,000
(15,000)
(25,000)
760,000
Accounts Receivable
Allowance for doubtful accounts
c. 900,000
d. 950,000
Allowance for sales return
Net Realizable Value
31. What is the year-end adjustment to the allowance for doubtful accounts on December 31,
The entity reported doubtful account expense in 2020 of P30,000 and had products returned for
credits totaling P15,000 at sale price. Gross sales for 2020 amounted to P150,000.
2020?
a. 900,000 debit
b. 900,000 credit
c. 500,000 debit
d. 500,000 credit
36. What amount of accounts receivable was written during 2020?
а. 35,000
b. 30,000
с. 15,000
d. 10,000
32. What is the NRV of accounts receivable on December 31, 2020?
a. 9,900,000
b. 8,250,000
c. 8,350,000
d. 8,200,00
37. What amount was collected from customers during 2020?
a. 6,035,000
b. 6,070,000
c. 6,020,000
d. 6,100,000
38. What amount was recorded as estimated sales return during 2020?
а. 10,000
b. 15,000
с. 20,000
d. 5,000
39. What amount was reported as net sales for 2020?
a. 6,150,000
b. 6,140,000
c. 6,100,000
d. 6,135,000
Transcribed Image Text:On January 1, 2020, Easy Company reported accounts receivable P2,070,000 and allowance for doubtful accounts P80,000. Credit sales Write offs Recoveries From inception of operations, Comprehensive Company provided for the uncollectible account expense under the allowance method using the percentage of sales method. 2017 11,100,000 12,250,000 14,650,000 15,000,000 260,000 295,000 300,000 310,000 22,000 37,000 36,000 40,000 2018 2019 2020 No year -end adjustment to the allowance method were made. The balance in the allowance for doubtful accounts was P1,000,000 on January 1, 2020. The collections from customers during 2020 totaled P14,000,000 excluding recoveries. During the current year, credit sales totaled P20,000,000 interim provisions for doubtful accounts were made at 2% of credit sales, bad debts of P200,000 were written off, and recoveries of accounts previously written off amounted to P50,000. Doubtful accounts are provided for as a percentage of credit sales. The entity calculated the percentage annually by using the experience of the three years prior to the current year An aging of receivables was made for the first time on December 31, 2020. 33. What amount should be reported as doubtful account expense for 2020? a. 310,000 b. 378,000 c. 300,000 d. 478,000 Aging 0-60 Balance Uncollectible 6,000,000 2,000,000 1,500,000 500,000 10% 61-180 20% 181-360 30% Over 360 50% 34. What amount should be reported as allowance for doubtful account on December 31, 2020? а. 110,000 b. 300,000 с. 222,000 Based on the review of collectability of the account balances in the over 360 days aging category, additional accounts totaling to P100,000 are to be written off on December 31, 2020. d. 378,000 Effective with the year-ended December 31, 2020, the entity adopted a new accounting method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging of accounts receivable. 35. What is the net realizable value of accounts receivable on December 31, 2020? a. 2,650,000 b. 2,690,000 c. 2,760,000 d. 2,800,000 29. What is the required allowance for doubtful accounts on December 31, 2020? a. 1,650,000 b. 1,950,000 c. 1,700,000 d. 1,450,000 Sky Company provided the following information at year-end 2019 2020 30. What amount should be reported as doubtful accounts for current year? a. 1,200,000 b. 1,650,000 880,000 (10,000) (20,000) 850,000 800,000 (15,000) (25,000) 760,000 Accounts Receivable Allowance for doubtful accounts c. 900,000 d. 950,000 Allowance for sales return Net Realizable Value 31. What is the year-end adjustment to the allowance for doubtful accounts on December 31, The entity reported doubtful account expense in 2020 of P30,000 and had products returned for credits totaling P15,000 at sale price. Gross sales for 2020 amounted to P150,000. 2020? a. 900,000 debit b. 900,000 credit c. 500,000 debit d. 500,000 credit 36. What amount of accounts receivable was written during 2020? а. 35,000 b. 30,000 с. 15,000 d. 10,000 32. What is the NRV of accounts receivable on December 31, 2020? a. 9,900,000 b. 8,250,000 c. 8,350,000 d. 8,200,00 37. What amount was collected from customers during 2020? a. 6,035,000 b. 6,070,000 c. 6,020,000 d. 6,100,000 38. What amount was recorded as estimated sales return during 2020? а. 10,000 b. 15,000 с. 20,000 d. 5,000 39. What amount was reported as net sales for 2020? a. 6,150,000 b. 6,140,000 c. 6,100,000 d. 6,135,000
The interest rate on similar obligations is 12%. The present value of 1 at 12% for three periods is
.712.
40. On January 1, 2020, Savage Company sold goods to another entity. The buyer signed a
noninterest bearing note requiring payment of P600,000 annually for seven years. The first
payment was made on January 1, 2020. The prevailing rate of interest for this type of note at
date of issuance was 10%
52. What is the amount should be reported as gain or loss on the sale of equipment in 2020?
a. 200,000 gain
b. 200,000 loss
c. 88,000 gain
d. 88,000 loss
Periods
Present value of 1 at 10%
Present value of OA of 1 at 10%
.56
4.36
53. What amount should be reported as interest income for 2020?
96,000
d. 85,440
7
.51
4.87
288,000
b. 120,000
а.
с.
What amount should be reported as sales revenue?
а. 3,216,000
b. 2,922,000
c. 2,616,000
d. 2,142,000
54. What is the carrying amount of the note receivable on December 31, 2020?
a. 559,600
b. 712,000
c. 797,440
d. 800,000
41. On December 31, 2020, Humility Company sold a machine to another entity in exchange for a
noninterest bearing note requiring ten annual payments of 500,000. The buyer made the first
payment on December 21, 2020. The market interest rate for similar notes at date of issuance
was 8%.
55. What amount should be reported as interest income for 2021?
a. 95,693
b. 96,000
c. 75,000
d. 60,000
Periods
Present value of 1 at 8%
Present value of OA of 1 at 8%
9.
.50
6.25
10
.46
6.71
56. On October 1 of the current year, an entity received a one-year note receivable bearing interest
at the market rate. The face amount of the note receivable and the entire amount of the interest
On December 31, 2020, what is the carrying amount of note receivable?
а. 2,250,000
b. 2,300,000
c. 3,125,000
d. 3,355,000
are due on September 30 of next year. The interest receivable on December 31 of the current
year would consist of an amount representing
a. Three months of accrued interest income
At year-end, Jovial Company received two P1,000,000 notes receivable from customers in
exchange for services rendered. On both notes, interest is calculated on the outstanding
principal balance at the annual rate of 3% and payable at maturity. The note from Zeta
Company, made under customary trade terms, is due in nine months and the note from Yola
Company is due in five years. The market interest rate for similar notes was 8%. The present
value of 1 due in nine months is .944 and the present value of 1 due in 5 years is .68.
b. Nine months of accrued interest income
c. Twelve months of accrued interest income
d. The excess on October 1 of the present value of the note receivable over the face amount
57. On July 1 of the current year, an entity obtained a two-year 8% note receivable for services
rendered. At that time, the market rate of interest was 10%. The face amount of the note and
the entire amount of interest are due of maturity. Interest receivable on December 31 of the
current year is
42. At what amount should the note receivable from Zeta Company be reported at year-end?
а. 1,000,000
b. 944,000
с. 965,200
d. 972,320
а.
5% of the face amount of the note
b. 4% of the face amount of the note
43. At what amount should the note receivable from Yola Company be reported at year-end?
5% of the present value of the note
с.
с. 932,000
d. 680,000
d.
4% of the present value of the note
a. 1,000,000
b. 782,000
Persevere Company is a dealer in equipment. On December 31, 2020, the entity sold an
equipment in exchange for a noninterest bearing note requiring five annual payments of
P500,000. The first payment was made on December 31, 2021.
The market interest rate for similar notes was 8%.
58. An entity uses the installment method to recognize revenue from installment sales. Customers
pay the installment notes in 24 equal monthly amounts which include 12% interest. What is the
carrying amount of the installment notes receivable six months after the sale?
75% of the original sales price
Less than 75% of the original sales price
The present value of the remaining monthly payments discounted at 12%
d.
а.
b.
PV of 1 at 8% for 5 periods
PV of an ordinary annuity of 1 at 8% for 5 periods
0.68
с.
3.99
Less than the present value of the remaining monthly payments discounted at 12%
44. On December 31, 2020, what is the carrying amount of note receivable?
b. 1,995,000
a. 2,500,000
59. What is the imputed interest?
c. 1,700,000
d. 1,495,000
a. Interest based on the stated interest rate
b. Interest based on the implicit interest rate
c. Interest based on the average interest rate
d. Interest based on the bank prime interest rate
45. What amount of interest income should be reported for 2021?
а.
505,000
с.
159,600
b. 101,000
d.
119,600
60. Accounting for the interest in a noninterest bearing note receivable is an example of what aspect
46. What is the carrying amount of the note receivable on December 31, 2021?
a. 1,654,600
b. 2,154,600
c. 2,000,000
d. 1,495,000
of accounting theory.
a. Relevance
b. Verifiability
c. Substance over form
d. Form over substance
61. On July 1 of the current year, an entity received a one-year note receivable bearing interest at
the market rate. The face amount of the note receivable and the entire amount of the interest are
47. What amount of interest income should be reported for 2022?
due in one year. The interest receivable account would show a balance on
132,368
b.
July 1 but not December 31
b.
а.
а.
172,368
160,000
d. 200,000
December 31 but not July 1
July 1 and December 31
Neither July 1 nor December 31
с.
с.
d.
On December 31, 2020, Precious Company sold an equipment with carrying amount of P2,000,000
and received a noninterest bearing note requiring payment of P500,000 annually for ten years. The
first payment is due December 31, 2021.
62. On July 1 of the current year, an entity received a one-year note receivable bearing interest at the
market rate. The face amount of the note receivable and the entire amount of the interest are due
in one year. When the note receivable was recorded on July 1, which of the following was
debited?
Interest receivable
The prevailing rate of interest for this type of note at date of issuance is 12%
Present value of 1 at 12% for 10 periods
Present value of ordinary annuity of 1 at 12% for 10 periods
а.
0.322
b.
Unearned discount on note receivable
5.650
Interest receivable and unearned discount on note receivable
с.
d. Neither interest receivable nor unearned discount on note receivable
48. On December 31, 2020, what is the carrying amount of the note receivable?
a. 5,000,000
b. 2,175,000
c. 1,610,000
d. 2,825,000
63. On August 15, an entity sold goods for which it received a note bearing the market rate of
interest on that date. The four-month note was dated July 15. Note principal, together with all
interest, is due November 15. When the note was recorded on August 15, which of the following
accounts increased?
49. What is the gain on sale of equipment to be recognized in 2020?
825,000
c. Prepaid interest
d. Interest revenue
a. Unearned discount
а.
3,000,000
с.
b. Interest receivable
b.
2,175,000
d.
64. An entity received a seven-year zero interest-bearing note on February 1, 2020 in exchange for
property sold. There was no established exchange price for the property and the note has no
ready market. The prevailing rate of interest for a note of this type was 7% on February 1, 2020,
6% on December 31, 2020, 8% on February 1, 2021, and 9% on December 31, 2021. What
interest rate should be used to calculate the interest revenue from the transaction for the years
ended December 31, 2020 and 2021, respectively?
a. 0% and 0%
b. 7% and 7%
50. What amount of interest income should be recognized for 2021?
319,800
300,000
а.
600,000
с.
b.
339,000
d.
51. What is the carrying amount of the note receivable on December 31, 2021?
c. 2,825,000
d. 2,664,000
2,325,000
b. 4,500,000
а.
c. 7% and 9%
d. 6% and 9%
On January 1, 2020, Allure Company sold an equipment with a carrying amount of 800,000, receiving
a noninterest bearing note due in three years with a face amount of P1,000,000. There is no established
market value for the equipment.
65. On January 1,2014, Mill Company sold a building and received as consideration P1,000,000
cash and a P4,000,000 noninterest bearing note due on January 1, 2017. There was no
established exchange price for the building, and the note had no ready market. The prevailing
Transcribed Image Text:The interest rate on similar obligations is 12%. The present value of 1 at 12% for three periods is .712. 40. On January 1, 2020, Savage Company sold goods to another entity. The buyer signed a noninterest bearing note requiring payment of P600,000 annually for seven years. The first payment was made on January 1, 2020. The prevailing rate of interest for this type of note at date of issuance was 10% 52. What is the amount should be reported as gain or loss on the sale of equipment in 2020? a. 200,000 gain b. 200,000 loss c. 88,000 gain d. 88,000 loss Periods Present value of 1 at 10% Present value of OA of 1 at 10% .56 4.36 53. What amount should be reported as interest income for 2020? 96,000 d. 85,440 7 .51 4.87 288,000 b. 120,000 а. с. What amount should be reported as sales revenue? а. 3,216,000 b. 2,922,000 c. 2,616,000 d. 2,142,000 54. What is the carrying amount of the note receivable on December 31, 2020? a. 559,600 b. 712,000 c. 797,440 d. 800,000 41. On December 31, 2020, Humility Company sold a machine to another entity in exchange for a noninterest bearing note requiring ten annual payments of 500,000. The buyer made the first payment on December 21, 2020. The market interest rate for similar notes at date of issuance was 8%. 55. What amount should be reported as interest income for 2021? a. 95,693 b. 96,000 c. 75,000 d. 60,000 Periods Present value of 1 at 8% Present value of OA of 1 at 8% 9. .50 6.25 10 .46 6.71 56. On October 1 of the current year, an entity received a one-year note receivable bearing interest at the market rate. The face amount of the note receivable and the entire amount of the interest On December 31, 2020, what is the carrying amount of note receivable? а. 2,250,000 b. 2,300,000 c. 3,125,000 d. 3,355,000 are due on September 30 of next year. The interest receivable on December 31 of the current year would consist of an amount representing a. Three months of accrued interest income At year-end, Jovial Company received two P1,000,000 notes receivable from customers in exchange for services rendered. On both notes, interest is calculated on the outstanding principal balance at the annual rate of 3% and payable at maturity. The note from Zeta Company, made under customary trade terms, is due in nine months and the note from Yola Company is due in five years. The market interest rate for similar notes was 8%. The present value of 1 due in nine months is .944 and the present value of 1 due in 5 years is .68. b. Nine months of accrued interest income c. Twelve months of accrued interest income d. The excess on October 1 of the present value of the note receivable over the face amount 57. On July 1 of the current year, an entity obtained a two-year 8% note receivable for services rendered. At that time, the market rate of interest was 10%. The face amount of the note and the entire amount of interest are due of maturity. Interest receivable on December 31 of the current year is 42. At what amount should the note receivable from Zeta Company be reported at year-end? а. 1,000,000 b. 944,000 с. 965,200 d. 972,320 а. 5% of the face amount of the note b. 4% of the face amount of the note 43. At what amount should the note receivable from Yola Company be reported at year-end? 5% of the present value of the note с. с. 932,000 d. 680,000 d. 4% of the present value of the note a. 1,000,000 b. 782,000 Persevere Company is a dealer in equipment. On December 31, 2020, the entity sold an equipment in exchange for a noninterest bearing note requiring five annual payments of P500,000. The first payment was made on December 31, 2021. The market interest rate for similar notes was 8%. 58. An entity uses the installment method to recognize revenue from installment sales. Customers pay the installment notes in 24 equal monthly amounts which include 12% interest. What is the carrying amount of the installment notes receivable six months after the sale? 75% of the original sales price Less than 75% of the original sales price The present value of the remaining monthly payments discounted at 12% d. а. b. PV of 1 at 8% for 5 periods PV of an ordinary annuity of 1 at 8% for 5 periods 0.68 с. 3.99 Less than the present value of the remaining monthly payments discounted at 12% 44. On December 31, 2020, what is the carrying amount of note receivable? b. 1,995,000 a. 2,500,000 59. What is the imputed interest? c. 1,700,000 d. 1,495,000 a. Interest based on the stated interest rate b. Interest based on the implicit interest rate c. Interest based on the average interest rate d. Interest based on the bank prime interest rate 45. What amount of interest income should be reported for 2021? а. 505,000 с. 159,600 b. 101,000 d. 119,600 60. Accounting for the interest in a noninterest bearing note receivable is an example of what aspect 46. What is the carrying amount of the note receivable on December 31, 2021? a. 1,654,600 b. 2,154,600 c. 2,000,000 d. 1,495,000 of accounting theory. a. Relevance b. Verifiability c. Substance over form d. Form over substance 61. On July 1 of the current year, an entity received a one-year note receivable bearing interest at the market rate. The face amount of the note receivable and the entire amount of the interest are 47. What amount of interest income should be reported for 2022? due in one year. The interest receivable account would show a balance on 132,368 b. July 1 but not December 31 b. а. а. 172,368 160,000 d. 200,000 December 31 but not July 1 July 1 and December 31 Neither July 1 nor December 31 с. с. d. On December 31, 2020, Precious Company sold an equipment with carrying amount of P2,000,000 and received a noninterest bearing note requiring payment of P500,000 annually for ten years. The first payment is due December 31, 2021. 62. On July 1 of the current year, an entity received a one-year note receivable bearing interest at the market rate. The face amount of the note receivable and the entire amount of the interest are due in one year. When the note receivable was recorded on July 1, which of the following was debited? Interest receivable The prevailing rate of interest for this type of note at date of issuance is 12% Present value of 1 at 12% for 10 periods Present value of ordinary annuity of 1 at 12% for 10 periods а. 0.322 b. Unearned discount on note receivable 5.650 Interest receivable and unearned discount on note receivable с. d. Neither interest receivable nor unearned discount on note receivable 48. On December 31, 2020, what is the carrying amount of the note receivable? a. 5,000,000 b. 2,175,000 c. 1,610,000 d. 2,825,000 63. On August 15, an entity sold goods for which it received a note bearing the market rate of interest on that date. The four-month note was dated July 15. Note principal, together with all interest, is due November 15. When the note was recorded on August 15, which of the following accounts increased? 49. What is the gain on sale of equipment to be recognized in 2020? 825,000 c. Prepaid interest d. Interest revenue a. Unearned discount а. 3,000,000 с. b. Interest receivable b. 2,175,000 d. 64. An entity received a seven-year zero interest-bearing note on February 1, 2020 in exchange for property sold. There was no established exchange price for the property and the note has no ready market. The prevailing rate of interest for a note of this type was 7% on February 1, 2020, 6% on December 31, 2020, 8% on February 1, 2021, and 9% on December 31, 2021. What interest rate should be used to calculate the interest revenue from the transaction for the years ended December 31, 2020 and 2021, respectively? a. 0% and 0% b. 7% and 7% 50. What amount of interest income should be recognized for 2021? 319,800 300,000 а. 600,000 с. b. 339,000 d. 51. What is the carrying amount of the note receivable on December 31, 2021? c. 2,825,000 d. 2,664,000 2,325,000 b. 4,500,000 а. c. 7% and 9% d. 6% and 9% On January 1, 2020, Allure Company sold an equipment with a carrying amount of 800,000, receiving a noninterest bearing note due in three years with a face amount of P1,000,000. There is no established market value for the equipment. 65. On January 1,2014, Mill Company sold a building and received as consideration P1,000,000 cash and a P4,000,000 noninterest bearing note due on January 1, 2017. There was no established exchange price for the building, and the note had no ready market. The prevailing
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