FATHER SATURNINO URIOS UNIVERSITY

ACCOUNTANCY PROGRAM

FINANCIAL ACCOUNTING AND REPORTING REVIEW

Name: Date: Score:

Instructor: Sean Justin F. Espina, CPA
Review Quiz #4: RECEIVABLES (PAS 1, PFRS 9): Accounts Receivables; Loans Receivable and Impairment; Notes
Receivables; & Receivable Financing
INVENTORIES (PAS 2): Inventories; Inventory Cost Flow; LCNRV; Gross Profit Method; & Retail
Inventory Method
AGRICULTURE (PAS 41): Biological Assets

Problem 1. For the year ended 2018, the following selected items are included the trial balance of BLESSED 36.

Accounts receivable 5,000,000 trade

Advances to shareholders, collectible w/ in 3 months 500,000 non-trade CA
Customer’s account credit balance 50,000 current liab
Allowance for doubtful accounts 200,000 trade, deduct
Receivables from officers, collectible w/ in 5 months 200,000 non-trade, CA
Claims for rebates and tax refunds 50,000 non-trade, CA
Dividends receivable 100,000 non-trade, CA
Accrued interest on bond investments 20,000 non-trade, CA
Advances to affiliates 50,000 non-trade, NCA
Notes receivable 1,000,000 trade
Creditor’s account debit balance 10,000 non-trade, CA
Advances to directors, due in 15 months 100,000 non-trade, NCA
Subscription receivable, collectible w/in 7months 50,000 non-trade, CA
Advances from suppliers 800,000 current liab
Accrued interest on notes receivable 50,000 trade
Accrued rent income 10,000 non-trade, NCA

Based on the information provided above, compute for the following:

1. Trade Receivables under current asset – 5,850,000
2. Non-Trade Receivables under current asset – 930,000
3. Trade and other receivables – 6,780,000

Problem 2. Provided below are the receivable accounts and basis of measurement of each account of “Pasko Na
Company”:
Face Value Present Value Current Cost Realizable value
Short-term receivables 1,000,000 1,100,000 1,200,000 900,000
Accounts Receivable 500,000 600,000 700,000 400,000
Interest bearing long-term receivables 2,000,000 2,100,000 2,200,000 2,100,000
Non-interest-bearing long-term receivables 3,000,000 2,800,000 3,100,000 2,900,000

Initially, at what should the following items be measured?

4. Short-term receivables – 1,000,000
5. Accounts Receivable – 500,000
6. Interest-bearing long-term receivables – 2,000,000
7. Non-interest-bearing long-term receivables – 2,800,000

Problem 3. Prepare the journal entries for each transaction using the two methods in accounting doubtful accounts
expense
Transaction Allowance Method Direct Write-off Method
8. Accounts of 30,000 are DAE 30,000 No entry
considered doubtful of ADA. 30,000
collection

9. The accounts are ADA 30,000 DAE 30,000

subsequently AR. 30,000 AR. 30,000
discovered to be
worthless or
uncollectible

10 The same accounts that AR 30,000 AR 30,000

are previously written ADA 30,000 DAE 30,000
off are unexpectedly
recovered or collected Cash 30,000 Cash 30,000
AR. 30,000 AR 30,000
Problem 4. R Company provided the following information relating to accounts receivable for the current year:

Accounts receivable on January 1 1,300,000

Credit sales 5,400,000
Collections from customers, excluding recovery 4,750,000
Accounts written off 125,000
Collection on accounts written off in prior year
(customer credit was not reestablished) 25,000
Estimated uncollectible receivables per aging
Of receivables at December 31 165,000

11. What is the balance of accounts receivable, before allowance for doubtful accounts on December 31? 1,825,000

12. What is the balance of doubtful accounts expense? 265,000

Problem 5. F Company provided the following information relating to current operations:

Accounts receivable, January 1 4,000,000

Accounts receivable collected 8,400,000
Cash sales 2,000,000
Inventory, January 1 4,800,000
Inventory, December 31 4,400,000
Purchases 8,000,000
Gross margin on sales 4,200,000

13. What is the balance of accounts receivable on December 31? 6,200,000

Problem 6. Katherine Company provided the following information for the current year:

January 1 December 31
Accounts receivable 1,200,000
Allowance for doubtful accounts 60,000
Sales 8,000,000
Cash collected from customers 7,000,000

The cash collections included recovery of P10,000 from a customer whose account had been written off as worthless
in prior year. During the year, it was necessary to recognize doubtful accounts expense of P100,000 and write off
worthless customers’ accounts of P30,000. At year-end, a customer settled an account by issuing a 12%, six month
note for P400,000.

14. What is the net realizable value of accounts receivable on December 31? 1,640,000

Problem 7. M Company provided the following accounts abstracted from the unadjusted trial balance at year-end:

Debit Credit
Accounts Receivable 5,000,000
Allowance for doubtful accounts 40,000
Net credit sales 20,000,000

The entity estimated that 3% of the gross accounts receivable will become uncollectible.

15. What amount should be recognized as doubtful accounts expense for the current year? 190,000

Problem 8. L Company provided the following data for the current year:

Allowance for doubtful accounts – January 1 180,000

Sales 9,500,000
Sales returns and allowances 800,000
Sales discounts 200,000
Accounts written off as uncollectible 200,000

The entity provided for doubtful accounts expense at the rate of 3% of net sales.

16. What is the allowance for doubtful accounts at year-end? 235,000

Problem 9. On January 1, 2015 E company reported accounts receivable P2,070,000 and allowance for doubtful
accounts P80,000. The entity provided the following data:
 Credit Sales Writeoffs Recoveries
2012 11,100,000 260,000 22,000
2013 12,250,000 295,000 37,000
2014 14,650,000 300,000 36,000
2015 15,000,000 310,000 40,000

The collections from customers during the year totaled P14,000,000 excluding recoveries.

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 current year.

17. What is the net realizable value of accounts receivable on December 31, 2015? 2,650,000

18. What amount should be reported as doubtful accounts expense for 2015? 300,000

19. What amount should be reported as allowance for doubtful accounts on December 31, 2015? 110,000

Problem 10. Kriz Company is a leading educational institution with student population of more than 50,000. Kriz
continuously maintains good quality education and a roster of qualified instructors. As a result, Kriz continuously
produces top graduates in several fields. As of December 31, 2010, Kriz has an outstanding receivable balance of
P23,250,000 broken down into: 0-60 days outstanding, P9,000,000; 61-120 days outstanding, P6,750,000; and over 120
days outstanding, P7,500,000. Estimated percent uncollectible of these accounts is 2%, 4% and 10%, respectively. Kriz
wrote off P525,000 of its receivables and recovered P300,000 from accounts previously written off in prior year. As of
December 31, 2009, Kriz has an allowance for uncollectible accounts of P650,000.

20. Base on the aging analysis, Kriz should report an allowance for doubtful accounts as of December 31, 2009 at :
1,200,000

Problem 11. Global Bank Granted a loan to a borrower on January 1, 2015. The interest on the loan is 12% payable
annually starting December 31, 2015. The loan matures in three years on December 31, 2017. The other data related to
the loan are:
Principal amount 5,000,000
Origination fees received from borrower 250,600
Direct Origination Costs incurred 100,000
Indirect Origination costs incurred 50,000
Note: Round the present values into three decimal places and round the effective interest rate (in percentage) into one
decimal place.
21. What is the carrying amount of the loan receivable on January 1, 2015? 4,849,400
22. What is the carrying amount of the loan receivable on December 31, 2015? 4,894,370.20
23. What is the interest income for 2016? 650,951.24

Problem 12. B Bank loaned B Company 7,500,000 on January 1, 2013. The terms of the loan were payment in full on
January 1, 2017 plus annual interest payment at 11%. The interest payment was made as scheduled on January 1, 2014.
However due to financial setbacks, B Company was unable to make the 2015 interest payment. B bank considered the
loan impaired and projected the cash flows from the loan on December 31, 2015. The bank accrued the interest on
December 31, 2014, but did not continue to accrue interest for 2015 due to impairment of the loan. The projected cash
flows are:
Date of cash flow Amount projected on December 31, 2015
December 31, 2016 500,000
December 31,2017 1,000,000
December 31, 2018 2,000,000
December 31, 2019 4,000,000
Round the present values in two decimal places.
24. Prepare the journal entry for the impairment of the loan on January 2015.
Impairment loss 2,965,000
Accrued interest receivable 825,000
Allowance for loan impairment2,140,000
25. Prepare the necessary journal entries on December 31, 2016?
Cash 500,000
Loan Receivable 500,000
Allowance for loan impairment 589,600
Interest Income 589,600

26. What is the carrying amount of the loan receivable on December 31,2017? 5,049,056
Cash 1,000,000
Loan Receivable 1,000,000
 Allowance for Loan Impairment 599,456
Interest Income 599,456

27. What is the interest income for 2016? 589,600

Problem 13. On December 31, 2015, Jet 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 Maxx Company, made under customary trade terms, is due in nine months and note from Hart Company
is due in five years.
The market interest rate for similar notes on December 31, 2015 was 8%. The compound interest factors to convert
future value into present value at 8% follow:
Present value of 1 due in nine months .944
Present value of 1 due in five years .680

28. What is the carrying amount of notes receivable from Hart Company on December 31, 2015? 782,000

29. What is the carrying amount of notes receivable from Maxx Company on December 31, 2015? 1,000,000

Problem 14. F Company has an 8% note dated June 30,2015, in the original amount of P1,500,000. Payments of
P500,000 in principal plus accrued interest are due annually on July 1, 2016,2017 and 2018.

30. On June 30, 2015, notes receivable will recorded at what amount? 1,500,000

31. What is the balance of note receivable on July 1, 2016? 1,000,000

32. In the June 30, 2017 statement of financial position, what amount should be reported as current asset for interest
on the note receivable? 80,000

Problem 15. On December 1, 2015, B company assigned specific accounts receivable totaling P4,000,000 as collateral
on a P3,000,000, 12% note form a certain bank. The entity will continue to collect the assigned accounts receivable. In
addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance on the P3,000,000
value of the note. The December collections of assigned accounts receivable amounted to P2,000,000 less cash discounts
of P100,000. On December 31, 2015, the entity remitted the collections to the bank in payment for the interest accrued
on December 31, 2015 and the note payable. The entity accepted sales returns of P150,000 on the assigned accounts
and wrote off assigned accounts of P200,000.

33. What is the balance of accounts receivable-assigned on December 31, 2015? 1,650,000

34. What amount should be disclosed as the equity of Bamboo Company in assigned accounts on December , 2015?
520,000

Problem 16. Zues Company factored P6,000,000 of accounts receivable to a finance entity at the end of current year.
Control was surrendered by Zeus Company. The factor assessed a fee of 3% and retained a holdback equal to 5% of
the accounts receivable.
In addition, the factor charged 15% interest computed on a weighted average time to maturity of the accounts receivable
of 54 days.

35. What would be the journal entry to record the transaction?

Cash 5,386,850
Receivable from factor 300,000
Service Charge/commission 180,000
Interest expense 133,150
Accounts Receivable 6,000,000

36. If all accounts are collected, what is the cost of factoring the accounts receivable? 313,150

Problem 17. On June 30, 2015, Ray Company discounted at the bank a customer P6,000,000, 6-month, 10% note
receivable dated April 30, 2015. The bank discounted the note at 12% without recourse.

37. What is the amount received from the note receivable discounting? 6,048,000

38. What is the loss on note receivable discounting? 52,000

Problem 18. Rand Company accepted from a customer a P4,000,000, 90-day, 12% interest-bearing note dated August
31, 2015. On September 30, 2015, the entity discounted the note with recourse at the Apex State Bank at 15%. The
discounting with recourse is accounted for as secured borrowing.

39. What is the amount received from the discounting of note receivable? 4,017,000

40. What is the loss on note receivable discounting? 0

Problem 19. A retailer imported goods at a cost of 260,000, excluding 40,000 non-refundable import duties and 20,000
refundable purchase taxes. The risk and rewards of ownership of the imported goods were transferred to the retailer
upon collection of the goods from the harbor warehouse. The retailer was required to pay for the goods upon collection.
The retailer incurred 10,000 to transport the goods to its retail outlet and a further 4,000 in delivering the goods to its
customer. Further selling costs of 6,000 were incurred in selling the goods.

41. What amount should the inventory be valued? 310,000

Problem 20. Alca Company’s inventory at June 30, 2014 was 750,000 based on a physical count of goods priced at cost
and before any necessary year-end adjustment relating to the following:

 Included in the physical count were goods billed to a customer FOB shipping point on June 30, 2014. These
goods costing 15,000 were picked up by the carrier on July 9, 2014.
 Goods shipped FOB destination on June 28, 2014 from a vendor to Alca was received on July 1, 2014. The
invoice cost was 25,000.

42. What amount should Alca report as inventory in its June 30, 2014 statement of financial position? 750,000 (point
of sale is point of delivery).

Problem 21. Violet Company’s inventory at December 31, 2014 was 5,000,000 based on physical count priced at cost
and before any necessary adjustment for the following:

 Merchandising costing 200,000, shipped FOB shipping point from a vendor on December 30, 2014 was
received and recorded on January 5, 2015.
 Goods in shipping area were included from inventory although shipment was not made until January 2, 2015.
The goods billed to the customer FOB shipping point on December 30, 2014, had a cost 800,000.

43. What amount should Violet report as inventory in its December 31, 2014 statement of financial position? 5,200,000

Problem 22. The unadjusted physical inventory of Liberty Company at December 31, 2014 was 3,000,000. Other
information follows:
 Goods were received and recorded on January 2, 2015 with cost of 180,000. Information revealed that the term
of the shipment is FOB destination and these goods were shipped on December 29, 2014.
 Merchandise in the warehouse costing 240,000 was billed to the customer FOB shipping point on December
29, 2014. These were excluded from the inventory but these were shipped on January 3, 2015.

44. How much should Liberty report as inventory in its December 31, 2014 statement of financial? 3,240,000

Problem 23. The inventory at December 31, 2014 for Conrad Company is valued at a cost of 947,800. Conrad Company
reviewed its year-end inventory and found the following items:
 A package containing a product costing 81,600 was standing in the shipping area when the physical inventory
was conducted. This was not included in the inventory because it was marked “Hold for shipping instructions”.
The purchase order was dated December 19 but the package was shipped and the customer was billed January
2, 2015.
 A special machine, fabricated to order for a particular customer, was finished and in the shipping room on
December 30, 2014. The customer was billed on that date and the machine was included in the inventory. The
machine costing 230,000 was shipped on January 2, 2015.
 Merchandise costing 23,500 was received on January 3, 2015 and the related purchase invoice was recorded
January 5, 2015. The invoice showed the shipment was made December 29, 2014, FOB destination.
 Goods costing 150,000 were sold and delivered on December 20,2014. The sale was accompanied by a
repurchase agreement that Power will “buyback” the inventory in February 2015.

45. What is the correct cost of inventory to be reported in Conrad’s financial statements? 949,400

Problem 24. A Company provided the following data:

Items counted in the bodega 4,000,000
 Items not included in the count specifically
Segregated per sale contract 100,000
Items in the receiving department, returned by customer,
In good condition 50,000
Items ordered and in the receiving department 400,000
Items ordered, invoice received but goods not received.
Freight is on account of seller. 300,000
Items shipped today, invoice mailed, FOB shipping point 250,000
Items shipped today, invoiced mailed, FOB destination 150,000
Items currently being used for window display 200,000
Items on counter for sale 800,000
Items in receiving department, refused because of damage 180,000
Items excluded in count, damaged and unsalable 50,000
Items in the shipping department 250,000

46. What is the correct amount of inventory? 5,850,000

Problem 25. Corolla Company incurred the following costs:

Materials 700,000
Storage costs of goods in process 180,000
Delivery to customers 40,000
Irrecoverable purchase taxes 60,000

47. At what amount should the inventory be measured? 940,000

Problem 26. Dean Sportswear regularly buys sweaters from Mill Company and is allowed trade discounts of 20% and
10% from the list price. Dean made a purchase during the year, and received an invoice with a list price of P600,000, a
freight charge of 15,000 and payment terms of 2/10,n/30.

48. What is the cost of the purchase? 447,000

Problem 27. On June 1, 2015, Pitt Company sold merchandise with an invoice price of 5,000,000 to Burr on account.
Pit allowed trade discounts of 30% and 20%. Credit terms were 2/10,n/30 and the sale was made FOB shipping point.
Pitt prepaid 200,000 of delivery costs for Burr as an accommodation.

49. On June 12, 2015, what amount was received by Pitt from Burr as remittance in full? 5,200,000

Problem 28. During the month of January, Metro Company which used a perpetual inventory system recorded the
following information pertaining to inventory:

Units unit cost total cost units on hand

Balance on 1/1 10,000 100 1,000,000 10,000
Purchased on 1/17 6,000 300 1,800,000 16,000
Sold on 1/20 9,000 7,000
Purchased 1/25 4,000 500 2,000,000 11,000

50. Under the moving average method, what amount should Metro report as inventory on January 31? 3,225,000

51. Under FIFO method, what amount should Metro report as inventory on January 31? 3,900,000

Problem 29. Yakal Company reported that a flood recently destroyed many of the financial records. The entity used an
average cost inventory valuation system. The entity made a physical count at the end of each month in order to
determine monthly ending inventory value. By examining various documents, the following data are gathered:

Ending inventory at July 31 60,000 units

Total cost of units available for sale in July 1,452,100
Cost of goods sold during July 1,164,100
Cost of beginning inventory, July 1 4.00 per unit
Gross profit on sales for July 935,900

Units Unit cost Total cost

July 5 55,000 5.10 280,500
11 53,000 5.00 265,000
15 45,000 5.50 247,000
16 47,000 5.30 249,100
Total purchases 200,000 1,042,100

52. How many units were sold during the month of July? 242,521
53. What is the cost of the inventory on July 31? 288,000

54. What is the number of units on July 1? 102,500

Problem 30. White Company carried four items in inventory. The following per-unit data relate to these items at the
end of first year of operations:

Units Cost Sales Price Selling cost Normal Profit

Category 1:
A 25,000 105 130 15 20
B 20,000 85 90 10 10
Category 2:
C 40,000 50 45 5 5
D 30,000 65 75 15 10

55. What is the measurement of inventory under LCNRV applied to inventory category? 7,725,000

56. What is the measurement of inventory under LCNRV applied to individual item? 7,625,000

57. What is the measurement of inventory under LCNRV applied to inventory as a whole? 7,875,000

Problem 31. In 2015, North Company experienced a decline in the value of inventory resulting in a write-down from
cost of 3,600,000 to net realizable value of 3,000,000. The entity used the allowance method to record the necessary
adjustment. In 2016, market conditions have improved dramatically. On December 31, 2016, the inventory had a cost
of 5,000,000 and net realizable value of 4,600,000.

58. Prepare the entries for the write-down of inventories for the year 2015 and 2016.
2015
Loss on inventory writedown 600,000
Allowance for inventory writedown 600,000

2016
Allowance for inventory writedown 200,000
Gain on reversal of inventory writedown 200,000

Problem 32. Use the following information for the next three questions.

A public limited company, Cromwell Dairy Products, produces milk on its farms. As of January 1, 2010 Cromwell has
a stock of 1,050 cows (average age, 2 years old) and 150 heifers (average age, 1 year old). Cromwell purchased 375
heifers, average age 1 year old, on July 1, 2010. No animals were born or sold during the year. The unit values less
estimated costs to sell were

1 - year old animal at December 31, 2010 P3,200

2 - year old animal at December 31, 2010 4,500
1.5 - year old animal at December 31, 2010 3,600
3 - year old animal at December 31, 2010 5,000
1 - year old animal at Jan. 1, 2010 and July 1, 2010
3,000
2 - year old animal at January 1, 2010 4,000

59. The increase in value of biological assets in 2010 due to price changes is
a. P1,500,000 c. P555,000
b. P 630,000 d. P460,000

60. The increase in value of biological assets in 2010 due to physical changes is
a. P870,000 c. P590,000
b. P720,000 d. P780,000

Price change = same age, different dates

Physical change = different age, same dates