Professional Documents
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Your audit disclosed that on December 31, 2010, the accounts receivable control account
of Alilem Company had a balance of P 2,865,000. An analysis of the account showed the
following:
Accounts known to be worthless
Advance payments to creditors on purchase orders
Advance to affiliated companies
Customers account reporting credit balances arising
from sales return
Interest receivable on bonds
Other trade accounts receivable unassigned
Subscriptions receivable due in 30 days
Trade accounts receivable assigned (Alilem companys
equity in assigned accounts is P 150,000)
Trade instalment receivable due 1-18 months,
including unearned finance charges of P 30,000
Trade receivables from officers due currently
Trade accounts on which post-dated checks are held ( no
entries were made on receipts of checks)
P 37,500
150,000
375,000
(225,000)
150,000
750,000
825,000
375,000
330,000
22,500
75,000
P 2,865,000
Questions:
1. The trade accounts receivable as of December 31, 2010 is
2. The net current trade and other receivables as of December 31, 2010 is
3. How much is the forgoing will be presented under noncurrent assets as of
December 31, 2010?
Your audit of Banayoyo Corporation for the year ended December 31, 2010 revealed that
the Accounts Receivable account consists of the following:
Trade accounts receivable (current)
Past due trade accounts
Uncollectible accounts
Credit balances in customers accounts
Notes receivable dishonoured
Consignment shipments at cost
The consignee sold goods costing P 96,000 for
P 160,000. A 10% commission was charged by the
consignee and remitted the balance to Banayoyo.
The cash was received in January, 2011.
Total
P 3,440,000
640,000
128,000
(80,000)
240,000
320,000
P 4,688,000
The balance of the allowance for doubtful accounts before audit adjustment is a credit of
P 80,000. It is estimated than an allowance should be maintained to equal 5% of trade
receivables, net of amount due from the consignee who is bonded. The company has not
provided yet for the 2010 bad debt expense.
Questions:
1. The trade accounts receivable
2. Allowance for doubtful accounts
3. Doubtful accounts expense
Following accounts:
Debit
Credit
Accounts receivable
P 1,000,000
Allowance for doubtful accounts
40,000
Sales
P 15,000,000
Sales return and allowance
700,000
Bantay Company estimate its bad debt expense to be 1 % of net sales. Determine
its bad debt expense
2. An analysis and aging of Burgos Corp. accounts receivable at December 31, 2010,
disclosed the following:
Amounts estimated to be uncollectible
P 1,800,000
Accounts receivable
17,500,000
Allowance for doubtful accounts (per books)
1,250,000
What is the net realizable value of Burgos receivables at December 31, 2010?
3. Cabugao Company provides for doubtful accounts based 3% of credit sales. The
following data are available for 2010.
Credit sales during 2010
P 21,000,000
Allowance for doubtful accounts 1/1/10
170,000
Collection of accounts written off in prior years
(Customer credit was re-established)
80,000
Customer accounts written off as uncollectible \
During 2010
300,000
What is the balance in allowance for doubtful accounts at December 31, 2010?
4. At the end of its first year of operations, December 31, 2010, Caoayan, Inc. reported
the following information:
Accounts receivable, net of allowance for
doubtful accounts
Customer accounts written off as uncollectible
during 2010
Bad debts expense for 2010
P 9,500,000
240,000
840,000
What should be the balance in accounts receivable at December 31, 2010, before
subtracting the allowance for doubtful accounts?
5. The following accounts were taken from Cervantes Inc.s statement of financial
position at December 31, 2010.
Debit
Credit
Accounts receivable
P 4,100,000
Allowance for doubtful accounts
100,000
Net credit sales
P 7,500,000
If doubtful accounts are 3% of accounts receivable, determine the bad debt expense
to be reported for 2010.
Sales returns in 2010 amounted to P 400,000. All returns were from charges sales
During 2010, accounts totalling to 44,000 were written off as uncollectible; bad debt
recoveries during the year amounted to P 3,000.
The allowance for bad debts is adjusted sso that it represents certain percentage of the
outstanding accounts receivable at year end. The required percentage at December
31, 2010 is 150% of the rate used on December 31, 2009.
Questions:
Based on the above and the result of your audit, answer the following:
1.
2.
3.
4.
P 3,600,000
72,000
P 3,528,000
Bad accounts previously written off prior to 2010 amounting to P 40,000 were
recovered.
The company decided to provide P 184,000 for doubtful accounts by journal entry at
the end of the year.
Accounts receivable of P 5,600,000 has been pledged to a local bank on a loan of P
3,200,000. Collections of P 1,200,000 were made on these receivables ( not included
in the collection previously given) and applied as partial payment to the loan.
Questions:
Based on the above and the result of your audit, answer the following:
1.
2.
3.
4.
P 480,000
19,200
2,400,000
2,560,000
17,600
An analysis of cash received from customers during the year revealed that P 1,411,200
was received from customers availing the 10-day discount period, P 792,000 from
customers availing 15-day discount period, P 4,800 represented recovery of accounts
written-off, and the balance was received from customers paying beyond the discount
period.
The allowance for doubtful accounts is adjusted so that it represents certain percentage of
the outstanding accounts receivable at year end. The required percentage at December 31,
2010 is 125% of the rate used on December 31, 2009.
Questions:
Based on the above and the result of your audit, answer the following:
1. The accounts receivable at December 31, 2010 is
2. The allowance for doubtful accounts at December 31, 2010 is
3. The doubtful account expense for the year ended December 31, 2010
Based on the above and the result of your audit, answer the following:
1.
2.
3.
4.
Receivable financing
Taguding Co. required additional cash for its operation and used accounts receivable to
raise such needed cash, as follows:
On June 30, 1010, Tagudin Co. discounted at a bank a customers P 600,000, 6month, 10% note receivable dated April 30, 2010. The bank discounted the note at
12% on the same date.
Questions:
Based on the above and the result of your audit, answer the following:
1. In its December 31, 2010 statement of financial position, Tagudin should report
note payable as a current liability at
ACCOUNTS RECEIVABLES
Trade receivables
Accounts receivable-with promissory note
Customers trade debtors
Trade accounts receivable
Notes receivable-without promissory note
Nontrade receivables-claims from other sources other than
sale of merchandise
services in the ordinary course of business
Banks and other financial institution
LOANS TO CUSTOMERS
Note: Current assets (trade & nontrade) w/n normal OC or one year
Noncurrent assets collectible beyond one year
Nontrade receivables
1) Advances to or receivables from shareholders, directors, officers or
employees. (collectible w/n one year-current assets)
2) Advances to affiliates long term investment
3) Advances to supplier-current assets
4) Subscription receivables- (collectible w/n one year-current assets)
-deduction to subscribed share capital
5) Creditors account- debit balance when overpayment or returns and
allowances current assets-Not material
OFFSET
6) Special deposits- noncurrent assets* remain outstanding for long period
-(collectible w/n one year-current assets)
7) Accrued income- current assets
Dividends receivable
Accrued rent income
Accrued royalties income
Accrued interest on bond investment
8) Claims receivable; current assets
Claims against common carriers for loss or damages current assets
Claim for rebates and tax refunds current assets
Claim for insurance entities current assets
Note: Customers credit balances current liabilities
Initial measurement of receivables
PFRS 9,paragraph 5.1.1
Financial asset initially recognize @ FAIR VALUE+ transaction cost
Usually TRANSACTION PRICE-=FMV of consideration given
Short-term receivables=FACE VALUE or original invoice amount
Accounts receivable - initially FACE VALUE or original invoice amount
- Subsequently NET REALIZABLE VALUE(NRV)
Long term receivables that are interest bearing FAIR VALUE = FACE VALUE
Long term receivables -noninterest bearing FAIR VALUE = PRESENT VALUE
SALES DISCOUNT for prompt payment
Cash discount reduction from an invoice price
Also known as SALES discount SELLER ( debit)-(credit if forfeited)
PURCHASE discount BUYER
GROSS METHOD GROSS AMOUNT OF THE INVOICE
NET METHOD= INVOICE PRICE-CASH DISCOUNT
BAD DEBTS
Allowance Method
Doubtful of collection
DA
xx
AFDA
Worthless or uncollectible
(written off)
AFDA
xx
xx
AR
xx