chap 4' accounts receivable

Question 1

it refers to claims arising from sale of merchandise or services in the ordinary course business. it also includes accounts receivable and notes receivable.

Answer 1

trade receivables

Question 2

are open accounts arising from the sale of goods and services in the ordinary course of business and not supported by promissory notes.

Answer 2

accounts receivable

Question 3

true or false: other names of accounts receivable are customer’s accounts, trade debtors, and trade accounts receivable.

Answer 3

true

Question 4

it represents claims arising from sourcez other than sale of merchandise or services in the ordinary course of business.

Answer 4

nontrade receivables

Question 5

trade receivables which are expected to be realized in cash within the normal operating cycle or one year, whichever is longer, are classied as _?

Answer 5

current assets

Question 6

non-trade receivables which are expected to be realized in cash within one year, the length of the operating cycle notwithstanding l, are classifed as _?

Answer 6

current assets

Question 7

if collectible beyond one year, nontrade receivables are classified as _?

Answer 7

noncurrent assets

Question 8

“an entity shall classify an asset as current when the entity expects to realize the asset or intends to sell or consume it in the entity’s normal operating cycle, or when the entity expects to realize the asset within twelve months after the reporting period.“

Answer 8

pas 1, presentation of financial statements, paragraph 66

Question 9

trade receivables and nontrade receivables which are currently collectible shall be presented on the face of the statement of financial position as one line item called _?

Answer 9

trade and other receivables

Question 10

advances to affiliates are _ assets.

Answer 10

noncurrent assets

Question 11

advances to supplier are _ assets.

Answer 11

current assets

Question 12

it should be shown preferably as a deduction from subscribed share capital unless collectible currently.

Answer 12

subscriptions receivable. contra-equity

Question 13

creditors’ accounts with debit balances as a result of overpayment or returns and allowances are classified as _ assets.

Answer 13

current assets

Question 14

special deposits in contract bids normally are classified as _ assets because such deposits are likely to remain outstanding for a considerable long period of time.

Answer 14

noncurrent asset

Question 15

dividend receivable, accrued rent receivable, accrued royalties receivable and accrued interest receivable are usually classifed as _ assets.

Answer 15

current assets

Question 16

claims receivable such as claims against common carriers for losses or damages, claim for rebates and tax refunds are normally classified as _ assets.

Answer 16

current assets

Question 17

are credit balances in accounts receivable resulting from overpayments, returns, and allowances, and advance payments from customers.

Answer 17

customers’ credit balances

Question 18

they are classified as current liabilities and are not offset against debit balances in other customer’s accounts, except when the same is not material in which case only the net accounrs receivable may be presented.

Answer 18

customers’ credit balances

Question 19

true or false: no adjustment is necessary to formally recognize the customers’ credit balancez because ultimately the credit balances are canceled for sales and cash settlement. but an adjustment may be made only for worksheet purposes, meaning, not formally journalizedand posted to the ledger.

Answer 19

true

Question 20

pfrs _, paragraph 5.1.1, provides that accounts receivable shall be recognized initially at face amount or original invoice amount plus transaction costs that are directly attributable to the acquisition.

Answer 20

pfrs 9, paragraph 5.1.1

Question 21

true or false: cash flows relating to short-term accounts receivable are not discounted because the effect of discounting is usually immaterial.

Answer 21

true

Question 22

true or false: with respect to accounts receivable, transaction costs are not normally incurred because the accounts simply arise from the act of selling goods in the ordinary course of business.

Answer 22

true

Question 23

pfrs _, paragraph 5.2.1, provides that after initial recognition, accounts receivable shall be measured at amortized cost.

Answer 23

pfrs 9, paragraph 5.2.1

Question 24

it is the net realizable value of accounts receivable.

Answer 24

amortized cost

Question 25

it is the amount of cash expected to be collected or the estimated recoverable amount.

Answer 25

net realizable value of accounts receivable

Question 26

true or false: assets should not be carried at above their recoverable amount.

Answer 26

true

Question 27

in estimating the net realizable value of trade accounts receivable, what accounts should be deducted?

Answer 27

allowance for freight charge, sales return, sales discount, doubtful accounts

Question 28

ownership of the goods purchased is vested upon the receipt thereof.

Answer 28

fob destination. the seller shall be responsible for the freight charge up to the point of destination.

Question 29

ownership of the goods purchased is vested in the buyer upon shipment thereof.

Answer 29

fob shipping point. it is incumbent upon the buyer to pay for the transportation charge from the point of shipment to the point of destination.

Question 30

the freight charge has been paid by the seller in advance before shipment.

Answer 30

freight prepaid

Question 31

means that freight charge on the goods shipped is not yet paid. the common carrier shall collect the same from the buyer. thus, under freight collect, the freight charge is actually paid by the buyer.

Answer 31

freight collect

Question 32

entities usually offer _ cash discounts to credit customers. it is a reduction from an invoice price by reason of prompt payment.

Answer 32

cash discounts

Question 33

true or false: a cash discount may be expressed as 5/10, n/30. this means that the customer is entitled to a 5% discount if payment is made in 10 days from the invoice date. if the customer failed to pay within the 10-day discount period, the gross amount of the invoice price must be paid within 30 days from the invoice date.

Answer 33

true

Question 34

the accounts receivable and sales are recorded at gross amount of the invoice.

Answer 34

gross method

Question 35

the accounts receivable and sales are recorded at net amount of the invoice or at the invoice minus the cash discount whether taken or not taken.

Answer 35

net method

Question 36

the sales discount forfeited account is classified as _?

Answer 36

other income

Question 37

is simply one of the costs of doing business on credit.

Answer 37

bad debt loss

Question 38

what are the two methods for bad debt loss?

Answer 38

allowance method and direct writeoff method

Question 39

if the doubtful accounts are subsequently found to be worthless, the accounts are written off as _?

Answer 39

uncollectible

Question 40

the effect of the recovery of accounts written off is _ on accounts receivable because the recharging and collection are offsetting.

Answer 40

0

Question 41

true or false: allowance for doubtful accounts is increased by the recovery.

Answer 41

true

Question 42

requires recognition of a bad debt loss only when the accounts proved to be worthless or uncollectible.

Answer 42

direct writeoff method

Question 43

true or false: worthless accountd are recorded by debiting bad debts and crediting accountd receivable. if the accounts are only doubtful of collection, no adjustment is necessary.

Answer 43

true

Question 44

it is often used by small businesses because it is simple ti apply.

Answer 44

direct writeoff method

Question 45

as a matter of fact, the bir recognized only this method for income rax purposes.

Answer 45

direct writeoff method

Question 46

this method violated the matching principle because the debt loss is often recognized in later accounting period than the period in which states the sale revenue was recognized.

Answer 46

direct writeoff method

Question 47

true or false: direct writeoff method is not permitted under ifrs.

Answer 47

true

Question 48

if the granting of credit and collection of accounts are under the charge of the sales manager, doubtful accounts shall be considered as _ or _.

Answer 48

distribution or cost selling expense

Question 49

if the granting of credit and collection of accounts are under the change of an officer other than sales manager, doutbful accounts shall be considered as _.

Answer 49

administrative expense

Question 50

in the absence of any contrary statement, doubtful accounts shall be classfied as _.

Answer 50

administrative expense

Question 51

receivables arising from advances to officers and employees, advances to suppliers, and advances to affiliates.

Answer 51

advances

Question 52

receivables from reimbursable deposits paid to cover potential damages or losses, deposits for guarantee of performance or payment, and deposits for returnable items.

Answer 52

deposits

Question 53

true or false: trade receivables that do not have a significant financing component are measured at their transaction price in
accordance with PFRS 15.

Answer 53

true

Question 54

the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected behalf of third parties.

Answer 54

transaction price

Question 55

fob stands for?

Answer 55

free on board

Question 56

are given to encourage orders in large quantity or to avoid frequent changes in catalogs, to alter prices of different quantities purchased, or to hide the true invoice price from competitors.

Answer 56

trade discounts

Question 57

are given to encourage prompt payment.

Answer 57

cash discounts