Professional Documents
Culture Documents
Question no. 7
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
Accounts Receivable
Receivables from Employees (part of non-trade receivables) current assets
Advances to Suppliers Current assets or deduction from Accounts Payable to the same
supplier
Accounts Receivable
Customers Accounts with Credit Balances Current Liabilities
Cost of merchandise must be included in inventories
Accounts Receivable
Subscriptions Receivable current asset if collectible within 12 months; otherwise, noncurrent asset or deduction from Shareholders Equity
Other Non-Trade Receivables Current asset or non-current asset depending on terms of
payment
Advances to Suppliers Current Assets
Suppliers Accounts with Debit Balances or Advances to Suppliers Current assets
Accounts Receivable
Claims for Income Tax Refund Current Assets
Accounts Receivable, amount of loan presented separately as part of liabilities
Accounts Receivable
Not recognized anymore (for write off)
PROBLEMS
3-1
(Ginoo Company)
Gross Method
Dec.
10
19
26
31
Jan. 5
68,400
50,000
Cash
Sales Discounts
Accounts Receivable-First Lady
67,032
1,368
40,000
Sales Discounts
Allowance for Sales Discounts
Cash
Allowance for Sales Discounts
Accounts Receivable-Teens Kingdom
68,400
50,000
68,400
40,000
800
800
39,200
800
40,000
Chapter 3 Receivables
Cash
Accounts Receivable-Mens World
Net Method
Dec. 9 Accounts Receivable-First Lady
Sales
68,400 x .0.98
10
19
26
31
50,000
50,000
67,032
67,032
49,000
Cash
Accounts Receivable-First Lady
67,032
39,200
49,000
67,032
39,200
1,000
1,000
2013
Jan. 5
9
Cash
Accounts Receivable Teens Kingdom
39,200
Cash
Accounts Receivable-Mens World
50,000
Allowance Method
Dec. 9 Accounts Receivable-First Lady
Allowance for Sales Discount
Sales
10
Dec. 19
26
31
Jan. 5
39,200
50,000
68,400
1,368
67,032
50,000
Cash
Allowance for Sales Discount
Accounts Receivable-First Lady
67,032
1,368
40,000
1,000
49,000
68,400
800
39,200
1,000
1,000
Cash
Allowance for Sales Discount
Accounts Receivable-Teens Kingdom
39,200
800
Cash
Accounts Receivable-Mens World
50,000
14
40,000
50,000
Chapter 3 Receivables
3-2.
(Colleco Supermarket)
June 1- Accounts Receivable Citibank
30 Accounts Receivable - BDO
Accounts Receivable Metrobank
Credit Card Service Charges
Sales
Cash
2,450,000
1,764,000
1,470,000
116,000
5,800,000
3,234,000
(Colayco Company)
(1)
July 14 Allowance for Doubtful Accounts
Accounts Receivable-Moret Co.
31
Aug. 15
Nov.
Nov. 4
5
Nov. 9
Nov. 15
15
Dec. 13
2,156,000
1,078,000
10,000
10,000
Notes Receivable
Sales
12,000
Cash
Notes Receivable
Sales
20,000
15,000
Cash
Credit Card Service Charge
Sales
4% x 20,000 = 800
19,200
800
12,300
12,000
35,000
20,000
12,000
300
9,000
Cash
Credit Card Service Charge
Accounts Receivable-Credit Card
5% x 9,000 = 450
8,550
450
9,000
9,000
10,000
Cash
Accounts Receivable-Moret Co.
10,000
Cash
Notes Receivable
Interest Income
15,000 x 12% x 120/360 = 600
15,600
10,000
15
10,000
15,000
600
Chapter 3 Receivables
3-4.
(Format Company)
a.
b.
P3,945,000
15%
P 591,750
P3,945,000
591,750
P4,536,750
(Formatted Company)
a.
b.
3-6.
P4,566,400
15%
P 684,960
P3,251,360
15%
P 487,704
P4,566,400
684,960
(2,000,000)
P3,251,360
(HRV Company)
Accrued interest at June 30, 2012 (3,000,000 1,000,000) x 12%
3-7.
P 240,000
(FX Corporation)
a.
2012
Jan. 1
Notes Receivable
Accumulated Depreciation
Loss on Sale of Equipment
Equipment
Discount on Notes Receivable
100,000
420,000
8,820
500,000
28,820
b.
2012
Dec. 31
2013
Dec. 31
8,542
9,567
8,542
9,567
16
Chapter 3 Receivables
2014
Dec. 31
Dec. 31
3- 8
10,711
10,711
Cash
Notes Receivable
100,000
100,000
a.
2.5 M x 2.4018
(5% x 7.5 M) x
(5% x 5.0 M) x
(5% x 2.5 M) x
Total
Amortization Table
Date
01/01/12
12/31/12
12/31/13
12/31/14
P6,004,500
334,838
199,300
88,975
P6,627,613
0.8929
0.7972
0.7118
Payment of
Principal
Interest
Paid
2,500,000
2,500,000
2,500,000
375,000
250,000
125,000
Interest
Revenue
795,344
545,785
281,008*
Amortization
of Discount
420,344
295,785
156,008*
Carrying
Value
6,627,863
4,548,207
2,343,992
------------
*rounded off
b.
Journal entries
2012
Jan. 1
Notes Receivable
Discount on Notes Receivable
Gain on Sale of Land
Land
7,500,000 6,627,863 = 872,137 Discount
6,627,863 6,000,000 = 627,863 Gain
7,500,000
Cash
Discount on Notes Receivable
Interest Revenue
Notes Receivable
2,875,000
420,344
Cash
Discount on Notes Receivable
Interest Revenue
Notes Receivable
2,750,000
295,785
872,137
627,863
6,000,000
2012
Dec. 31
795,344
2,500,000
2013
Dec. 31
545,785
2,500,000
17
Chapter 3 Receivables
2014
Dec. 31
3-9
Cash
Discount on Notes Receivable
Interest Revenue
Notes Receivable
2,625,000
156,008
281,008
2,500,000
2.5 M
(18%
(18%
(18%
Total
x 2.4018
x 7.5 M) x
x 5.0 M) x
x 2.5 M) x
x
x
x
0.8929
0.7972
0.7118
P3,437,665
2,710,480
2,099,810
P8,247,955
P6,004,500
1,205,415
717,480
320,310
P8,247,705*
0.8929
0.7972
0.7118
Amortization Table
Date
01/01/10
12/31/10
12/31/11
12/31/12
Payment of
Principal
2,500,000
2,500,000
2,500,000
Interest
Paid
1,350,000
900,000
450,000
Interest
Revenue
989,755
646,525
315,765*
Amortization
of Premium
360,245
253,475
134,235*
Carrying
Value
8,247,955
5,387,710
2,634,235
------------
Journal entries
2012
Jan. 1
Notes Receivable
Premium on Notes Receivable
Gain on Sale of Land
Land
8,247,955 7,500,000 = 747,955 Premium
8,247,955 6,000,000 = 2,247,955 Gain
7,500,000
747,955
Cash
Premium on Notes Receivable
Interest Revenue
Notes Receivable
3,850,000
Cash
Premium on Notes Receivable
Interest Revenue
Notes Receivable
3,400,000
2,247,955
6,000,000
2012
Dec. 31
360,245
989,755
2,500,000
2013
Dec. 31
18
253,475
646,525
2,500,000
Chapter 3 Receivables
2014
Dec. 31
3-10
Cash
Premium on Notes Receivable
Interest Revenue
Notes Receivable
2,950,000
134,235
315,765
2,500,000
(Word Company)
Bad Debts Expense
Allowance for Bad Debts
P52,000
50,000
(Edit Company)
3-12
c.
d.
e.
f.
g.
P50,000
2,000
P52,000
P 6,000
3,000
48,000
(12,000)
P45,000
Accounts receivable
Sales
4,800,000
Cash
Sales discounts
Accounts receivable
3,920,000
80,000
4,800,000
4,000,000
20,000
20,000
Accounts receivable
Allowance for uncollectible accounts
5,000
Cash
Accounts receivable
5,000
Notes receivable
Accounts receivable
25,000
Cash
Notes payable-bank
400,000
Cash
Accounts receivable
150,000
Notes payable-bank
Cash
150,000
5,000
5,000
25,000
400,000
150,000
150,000
19
65,000
65,000
Chapter 3 Receivables
h.
Interest receivable
Interest revenue
250
250
Accounts receivable
(450,000+4,800,0004,000,00020,00025,000150,000)
Less Allowance for uncollectible accounts
Net realizable value/Net amortized cost
3-13
P1,055,000
59,000
P 996,000
(Rav, Inc.)
Accounts Receivable, December 31, 2011
Sales on account during 2012
Cash received from customers
Cash discounts allowed: (882,000 98%) x 2%
(495,000 99%) x 1%
Recovery of accounts written off
Accounts written off as worthless
Credit memoranda for sales returns
Accounts Receivable, December 31, 2012
P 337,000
1,500,000
(1,600,000)
P18,000
5,000
23,000)
3,000
( 11,000)
(
6,000)
P 200,000
P 12,000
3,000
( 11,000)
15,000
P 19,000
337,000
1,500,000
3,000
Total
Balance, end
1,840,000
200,000
Collections
Cash discounts
Write off
Sales returns
Total
1,600,000
23,000
11,000
6,000
1,640,000
11,000
Total
11,000
20
Balance, beg
Recovery
Impairment
Total
Balance, end
12,000
3,000
15,000
30,000
19,000
Chapter 3 Receivables
3-14
(Revo Company)
Allowance for Uncollectible Accounts, January 1, 2012
Accounts written off
Recovery of accounts previously written off
Additional accounts written off
Allowance for Uncollectible Accounts, December 31, 2012
before adjustments (debit balance)
Required balance in Allowance account based on aging:
(5% x 240,000) + (25% x 20,000) + (50% x 30,000) + (90% x 24,000)
Required adjustment/Doubtful Accounts Expense for 2012
Accounts Receivable, December 31, 2012
Less Allowance for Uncollectible Accounts
Net amortized cost
3-15
3-16
P 34,000
( 47,000)
7,000
( 6,000)
(P 12,000)
53,600
P65,600
P654,000
53,600
P600,400
(Adventure Company)
a.
Accounts Receivable, January 1
Sales during 2012
Cash collected from customers
Recovery of accounts previously written off
Note received in settlement of an account
Accounts written off as worthless
Accounts Receivable, December 31
P 1,200,000
10,000,000
(8,720,000)
20,000
( 400,000)
( 100,000)
P 2,000,000
P 2,000,000
600,000
P 1,400,000
P 120,000
70,000
P 190,000
b.
P 190,000
100,000
(
20,000)
(
60,000)
P 210,000
c.
Accounts Receivable
Less Allowance for Uncollectible Accounts
Net amortized cost
P 2,000,000
190,000
P1,810,000
(Maynilad Company)
Alternative 1
Carrying value (10 M + 1.2 M)
Present value of future cash inflows:
Principal due on 12/31/14
9M x 0.7972
Interest for 2 years
9M x 8% = 720,000; 720,000 x 1.6901
Impairment loss
21
11,200,000
P7,174,800
1,216,872
8,391,672
P2,808,328
Chapter 3 Receivables
8,391,672
2,808,328
10,000,000
1,200,000
11,200,000
2,500,120
2,104,608
1,765,264
1,474,360
1,225,584
9,069,936
2,130,064
9,069,936
2,130,064
10,000,000
1,200,000
Alternative 3
Carrying value
Present value of future cash inflows:
Principal due on 12/31/14
10M x 0.7972
7,972,000
Interest due on 12/31/13 and 12/31/14
10M x 9% = 900,000; 720,000 x 1.6901 1,521,090
Impairment loss
Entry: Restructured Notes Receivable
Impairment Loss Receivables
Notes Receivable
9,493,090
506,910
Cash
Interest Receivable
1,200,000
10,000,000
9,493,090
506,910
10,000,000
1,200,000
Alternative 4
Carrying value
Present value of future cash inflows:
Principal due on 12/31/12
11.2M x 0.797193876
Interest due on 12/31/11 and 12/31/12
11.2M x 12% = 1,344,000;
1,344,000 x 1.6900510
Impairment loss
11,200,000
8,928,572
2,271,428
11,200,000
---------
(Kate Company)
(a)
Cash
Notes Payable National Bank
750,000
750,000
22
Chapter 3 Receivables
(b)
Current assets:
Trade and other receivables (including P900,000 of accounts
pledged as collateral for a loan with National Bank)
P2,000,000
Current liabilities:
Notes Payable National Bank
Interest Payable
3-18
P 750,000
7,500
(Lexus Company)
Amount of the loan
Less service charge (2% x 750,000)
Net proceeds from the assignment of accounts receivable
Sept. 1
Sept 1-30
P625,000
15,000
P610,000
800,000
Cash
Finance Charges
Notes Payable Pacific Bank
634,000
16,000
Cash
300,000
800,000
650,000
Oct. 1-31
300,000
300,000
6,500
306,500
10,000
10,000
400,000
31
31
400,000
350,000
3,500
Accounts Receivable
Accounts Receivable Assigned
100,000
353,500
100,000
21
4,000,000
Cash
Finance Charges
Notes Payable Bank
5% x 3,200,000 = 160,000
3,040,000
160,000
23
4,000,000
3,200,000
150,000
150,000
Chapter 3 Receivables
July
31
Aug 1
15
Cash
Sales Discounts
Accounts Receivable Assigned
2% x 2,500,000 = 50,000
2,450,000
50,000
2,500,000
48,000
Aug 31
Cash
Accounts Receivable Assigned
Sept 1
2,500,000
2,548,000
50,000
50,000
1,000,000
1,000,000
700,000
10,500
Accounts Receivable
Accounts Receivable Assigned
300,000
710,500
300,000
3 20 (Fortune Company)
Oct. 1
1
31
Nov. 30
3-21
2,000,000
Cash
Finance Charges
Notes Payable
1,440,000
90,000
2,000,000
1,500,000
Interest Expense
Notes Payable
Accounts Receivable Assigned
15,000
985,000
Notes Payable
Interest Expense
Cash
Accounts Receivable Assigned
515,000
5,150
279,850
(Highlander Company)
a.
Sept. 1
Cash
Receivable from Factor
Loss from Factoring
Accounts Receivable
800,000 x 10% =80,000 Loss;
720,000 x 5% = 36,000 withheld
Nov. 1
Cash
Finance Charges
Notes Payable-Bank
1,000,000
800,000
684,000
36,000
80,000
800,000
582,000
18,000
600,000
24
Chapter 3 Receivables
3% x 600,000 = 18,000
b.
Dec. 31
3-22
10,400
(a)
P1,080,000
( 64,800)
P1,015,200
(b)
P 150,000
P
( 54,000)
96,000
50,000
P
P
1,500
51,500
(1,259)
50,241
( Edsamail Company)
(a)
(b)
Interest Receivable
Interest Revenue
500,000 x 8% x 7/12
Cash
Loss on Sale of Notes Receivable
Notes Receivable
Interest Receivable
3-24
10,400
(Hiku Company)
(c)
3-23
a.
23,333
23,333
517,500
5,833
500,000
23,333
= P89,260
89,260
89,260
= P77,774
= P76,176
1,233
1,233
Cash
76,176
Liability on Discounted Notes Receivable
25
76,176
Chapter 3 Receivables
c.
= P63,156
= P61,988
1,973
1,973
Cash
61,988
Liability on Discounted Notes Receivable
3-25
61,988
(Crosswind Corporation)
2012
Feb. 1
Notes Receivable
Accounts Receivable
April 1
60,000
Interest Receivable
Interest Revenue
60,000 x 16% x 2/12
Nov. 2
30
3-26
60,000
1,600
1,600
Cash
Liability on Discounted Notes Receivable
60,000 + (60,000 x .16 x 9/12) = 67,200
67,200 (67,200 x .15 x 7/12) = 61,320
61,320
61,320
280
68,700
61,320
60,000
1,600
68,700
(Explorer Company)
(a)
Accounts receivable factored
Purchase price
Purchase price of accounts receivable factored
Less amount withheld as protection against returns and allowances
5% x 1,700,000
Net cash received from the factored accounts
(b)
Cash
Receivable from Factor
Loss on Factoring
Accounts Receivable
P2,000,000
85%__
P 1,700,000
85,000_
P1,615,000
1,615,000
85,000
300,000
Sales Returns
Receivable from Factor
30,000
Cash
55,000
26
2,000,000
30,000
30,000
Chapter 3 Receivables
(c)
(d)
Interest Revenue
Interest Receivable
2,800
2,800
Accounts Receivable
Sales
2,800,000
Cash
Sales Discounts
Accounts Receivable (2,218,000 180,000)*
Accounts Receivable Assigned *
2,200,000
18,000
2,800,000
Notes Receivable
Accounts Receivable
250,000
Cash
Notes Receivable
Interest Revenue
216,000
Interest Receivable
Interest Revenue
2,800
250,000
200,000
16,000
2,800
Cash
Liability on Discounted Notes Receivable
(e)
(f)
(g)
(h)
(i)
2,038,000
180,000
41,400
41,400
300,000
Cash
Finance Charges
Notes Payable
222,000
18,000
300,000
240,000
Accounts Receivable
Notes Receivable
Interest Revenue
15,900
12,000
15,000
900
Notes Payable
Interest Expense
Cash
12,000
180,000
3,000
183,000
(j)
Interest Receivable
Interest Revenue
*See item (h)
20,000
20,000
3,200
3,200
27
Chapter 3 Receivables
(b)
P876,900
P135,000
815,900
120,000
6,000
( 20,000)
P876,900
Theory
MC1
MC2
MC3
MC4
MC5
A
A
C
A
A
MC6
MC7
MC8
MC9
MC10
A
C
C
C
A
MC11
MC12
MC13
MC14
MC15
C
A
D
A
C
Problems
MC16
MC17
MC18
MC19
MC20
B
A
MC21
MC22
MC23
MC24
D
D
C
D
MC25
MC26
B
B
MC27
MC28
MC29
MC30
A
B
D
MC31
MC32
MC33
C
C
28
Chapter 3 Receivables
MC34
MC35
MC36
B
B
MC37
MC38
MC39
MC40
D
C
A
D
2,000,000 x 12% x 1/12 = 20,000 (Note: The difference between interest income of
P21,333 and interest receivable of 20,000 is debited to Discount on Notes Receivable).
500,000 x 8% x 4/12 = 13,333
1,250,000 - (2% x 1,250,000)} = 1,225,000
1,225,000 + 695,000 = 1,920,000
(500,000 + 2,200,000) x 3% = 81,000; 81,000 32,000 = 49,000
550,000 [(500,000 x 0.8265) + (40,000 x 1.7355)] = 67,380
5,500,000 [(4,000,000 X .83) + (320,000 X 1.74)] = 1,623,200
(4,000,000 X .83) + (320,000 X 1.74) = 3,876,800
29