ACC 112 – Chapter 4: Audit of Receivables Practice Questions, Eastern Gateway Community College Latest Study Guide (2026)

EGCC ACC 112 CHAPTER 4 PRACTICE QUESTIONS WITH
CORRECT AND VERIFIED ANSWERS LATEST 2026 – AUDIT OF
RECEIVABLES STUDY GUIDE
Problem 1
The accounts receivable of FRANCO COMPANY were stated at P1,467,000 in a balance sheet
submitted to a banker for credit. You are called upon to audit the report and, upon analysis,
the asset was found to consist of the following items:

Due from customers on open account P 1,125,000
Acknowledged claim for damages 22,500
Due from consignee at billed price – cost price
being P22,500 30,000
Investment in and advances to affiliated company 150,000
Loans to officers and employees 13,500
Deposits with municipalities – bids for contracts 67,500
Unpaid capital stock subscriptions 60,000
Advances to creditors for merchandise purchased
but not received 24,000
Cash advanced to salesmen for traveling expenses 4,500
Allowance for doubtful accounts ( 30,000)
P1,467,000

The amount of P1,125,000 due from customers was the remaining balance after deducting
accounts with credit balances of P6,000.

During your examination, you noted that on December 31, the company assigned P300,000
of customers’ accounts to secure a 17%, P240,000 note payable. A 1% commission based
on the accounts assigned was charged and deducted from the cash received. The client
recorded this transaction by a debit to cash and a credit to notes payable.

Questions

1. How much is the Accounts Receivable (gross) balance at December 31?
a. P 759,000 b. P 789,000 c. P 1,101,000 d. P 1,131,000

2. The total current non-trade receivable balance at December 31 is:
a. P 64,500 b. P 96,000 c. P 120,000 d. P 192,000

3. The liability for the accounts receivable – assigned is:
a. P 237,000 b. P 240,000 c. P 243,000 d. P 300,000

4. The total non-trade receivable balance at December 31 is:
a. P 342,000 b. P 318,000 c. P 313,500 d. P 245,000

Solution
(1) Claims Receivable 22,500
Accounts receivable 22,500
(2) Sales 30,000
Accounts receivable 30,000
(3) Advances to affiliates 150,000
Accounts receivable 150,000
(4) Receivables - officers/employee 13,500
Accounts receivable 13,500
(5) Deposits for contracts bidding 67,500

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, Accounts receivable 67,500




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,(6) Subscription receivable 60,000
Accounts receivable 60,000
(7) Advances to suppliers 24,000
Accounts receivable 24,000
(8) Advances to officers/employee 4,500
Accounts receivable 4,500
(9) Accounts receivable 30,000
Allowance for bad debts 30,000
(10) Accounts receivable 6,000
Customers with credit balance 6,000
(11)
OE: Cash 237,000
Notes payable 237,000
CE: Cash 237,000
Commission expense 3,000
Notes payable 300,000
Adj: Commission expense 3,000
Notes payable 3,000

Unadjusted AR 1,467,000 Non-trade AR
(1) ( 22,500) Claims receivable 22,500
(2) ( 30,000) Advances to affiliates 150,000
(3) ( 150,000) Advances to off/empl
(4) ( 13,500) ( 13,500 + 4,500) 18,000
(5) ( 67,500) Deposit for contracts 67,500
(6) ( 60,000) Subscription receivable 60,000
(7) ( 24,000) Advances to suppliers 24,000
(8) ( 4,500)
(9) 30,000
(10) 6,000
Adjusted balance 1,131,000 Total 342,000

Current non-trade AR
Claims receivable 22,500
Advances to off/empl
( 13,500 + 4,500) 18,000
Advances to suppliers 24,000
Total 64,500
Answer:
1. D 2. A 3. B 4. A

Problem 2
In your audit of MENDOZA COMPANY for the past calendar year, you find the following
accounts:
ACCOUNTS RECEIVABLES
Jan. 1, 2002 P 800,000 Jan. – Dec. 1992 collections P 5,900,000
Jan. – Dec. Sales 6,300,000 Jan. – Dec. write-off 100,000


ALLOWANCE FOR BAD DEBTS
Jan. – Dec. Write-off of Jan. 1, 2002 P 95,000
last year’s receivables P 85,000 Dec. 31 provisions 315,000

Write-off of this year’s
Receivables 15,000

In your examination, you find that the balance of Accounts Receivable represents sales of
the current audit year only; that credit balances in the subsidiary ledger for accounts
receivable totaled P80,000; and that the current year’s provision for bad debts expense was
5% of sales (as compared with 4½% last year, 4% of the year before, and 3½% the next
previous year). Sequential to aging the accounts receivable, you and the company’s
treasurer agree on an additional write-off of P50,000, and P300,000 as the probable loss to
be sustained on collection of the accounts receivable balance.
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, Questions

1. The adjusted Accounts Receivable balance is:
a. P 830,000 b. P 1,100,000 c. P 1,130,000 d. P 1,180,000

2. The adjusted Allowance for Bad Debts is:
a. P 260,000 b. P 300,000 c. P 315,000 d. P 355,000

3. The adjusted Bad Debts account is:
a. P 260,000 b. P 300,000 c. P 315,000 d. P 355,000

4. The provision per record at December 31 is:
a. P 260,000 b. P 300,000 c. P 315,000 d. P 355,000

Solution
Accounts Receivable 80,000
Customers’ credit balance 80,000
Allowance for bad debts 50,000
Accounts receivable 50,000
Bad debts expense 40,000
Allowance for bad debts 40,000
Computation:
Provision per records 315,000
* Provision per audit 355,000
Adjustment 40,000

* Beg. balance 95,000
+ Provisions 355,000 squeezed figure
- Write-off per book 100,000
- Additional write-off 50,000
Ending balance 300,000
Answer:
1. C 2. B 3. D 4. C

Problem 3
The following selected transactions occurred during the year ended December 31, 2006 of
DOMINGO COMPANY:

Gross sales (cash and credit) P 900,736.80
Collections from credit customers, net of 2% cash discount 294,000.00
Cash sales 180,000.00
Uncollectible accounts written off 19,200.00
Credit memos issued to credit customers for sales ret./allow. 10,080.00
Cash refunds given to cash customers for sales ret./allow. 15,168.00
Recoveries on accounts receivable written-off in prior years
(not included in cash received stated above) 6,505.20

At year-end, the company provides for estimated bad debts losses by crediting the
Allowance for Bad Debts account for 2% of its net credit sales for the year. The allowance
for bad debts at the beginning of the year is P19,327.20.

Questions
1. How much is the DOMINGO COMPANY’s gross sales?
a. P 900,736.80 b. P 720,736.80 c. P 704,656.80 d. P 689,488.80




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