CHAPTER 3 - RECEIVABLES Discussion Question
19. a. Accounts Receivable
b. Receivables from Employees (part of non-trade receivables) – current assets
c. Advances to Suppliers – Current assets or deduction from Accounts Payable to the same supplier
d. Accounts Receivable
e. Customers’ Accounts with Credit Balances – Current Liabilities f. Cost of merchandise must be included in inventories
g. Accounts Receivable
h. Subscriptions Receivable – current asset if collectible within 12 months; otherwise, non-current asset or deduction from Shareholders’ Equity
i. Other Non-Trade Receivables – Current asset or non-current asset depending on terms of sale
j. Advances to Suppliers – Current Assets
k. Suppliers’ Accounts with Debit Balances or Advances to Suppliers – Current assets l. Accounts Receivable
m. Claims for Income Tax Refund – Current Assets
n. Accounts Receivable, amount of loan presented separately as part of liabilities o. Accounts Receivable
p. Not recognized anymore (for write off) PROBLEMS 3-1. (Ginoo Company)
Gross Method
2016
Dec. 9 Accounts Receivable-First Lady 102,600
Sales 102,600
120,000 x 90% x 95%
10 Accounts Receivable-Men’s World 50,000
Sales 50,000
19 Cash 100,548
Sales Discounts 2,052
Accounts Receivable-First Lady 102,600
26 Accounts Receivable-Teens’ Kingdom 40,000
Sales 40,000
31 Sales Discounts 800
Allowance for Sales Discounts 800
2017
Jan. 5 Cash 39,200
Allowance for Sales Discounts 800
Accounts Receivable-Teens’ Kingdom 40,000
9 Cash 50,000
Accounts Receivable-Men’s World 50,000
Net Method
2016
Dec. 9 Accounts Receivable-First Lady 100,548
Sales 100,548
102,600 x .0.98
10 Accounts Receivable-Men’s World 49,000
Sales 49,000
19 Cash 100,548
Dec. 26 Accounts Receivable-Teens’ Kingdom 39,200
Sales 39,200
31 Accounts Receivable-Men’s World 1,000
Sales Discount Forfeited 1,000
2017
Jan. 5 Cash 39,200
Accounts Receivable – Teens’ Kingdom 39,200
9 Cash 50,000
Accounts Receivable-Men’s World 50,000
Allowance Method
2016
Dec. 9 Accounts Receivable-First Lady 102,600
Allowance for Sales Discount 2,052
Sales 100,548
10 Accounts Receivable-Men’s World 50,000
Allowance for Sales Discount 1,000
Sales 49,000
19 Cash 100,548
Allowance for Sales Discount 2,052
Accounts Receivable-First Lady 102,600
26 Accounts Receivable-Teens’ Kingdom 40,000
Allowance for Sales Discount 800
Sales 39,200
31 Allowance for Sales Discount 1,000
Sales Discount Forfeited 1,000
2017
Jan. 5 Cash 39,200
Allowance for Sales Discount 800
Accounts Receivable-Teens’ Kingdom 40,000
9 Cash 50,000
Accounts Receivable-Men’s World 50,000
3-2. (Colleco Supermarket) June
1-30 Accounts Receivable – Citibank Cash 2,450,000 1,764,000
Accounts Receivable – Metrobank 1,470,000
Credit Card Service Charges 116,000
Sales 5,800,000
Cash 3,234,000
Accounts Receivable - Citibank 2,156,000
Accounts Receivable - Metrobank 1,078,000
3-3. (Colayco Company) (1)
Jul 14 Allowance for Doubtful Accounts 10,000
Accounts Receivable-Moret Co. 10,000
31 Notes Receivable 12,000 Sales 12,000 Aug. 15 Cash 20,000 Notes Receivable 15,000 Sales 35,000 Nov. 1 Cash 19,200
Credit Card Service Charge 800
Sales 20,000
Nov. 4 Accounts Receivable-P. Noval 12,300
Notes Receivable 12,000
Interest Revenue 300
12,000 x .10 x 90/360 = 300
5 Accounts Receivable-Credit Card 9,000
Sales 9,000
9 Cash 8,550
Credit Card Service Charge 450
Accounts Receivable-Credit Card 9,000
5% x 9,000 = 450
15 Accounts Receivable-Moret Co. 10,000
Allowance for Doubtful Accounts 10,000
15 Cash 10,000
Accounts Receivable-Moret Co. 10,000
Dec. 13 Cash 15,600
Notes Receivable 15,000
Interest Revenue 600
15,000 x 12% x 120/360 = 600 3-4. (Format Company)
(a) Carrying value of the note on January 1, 2016 (6M x 0.6575) P3,945,000
Interest rate 15%
Interest revenue for 2016 P 591,750
Carrying value of the note on January 1, 2017 (3,945,000 + 591,750) P4,536,750
Interest rate 15%
Interest revenue for 2017 P 680,513
(b) Carrying value, December 31, 2016 (see above) P4,536,750 Carrying value, December 31, 2017 (4,536,750 + 680,513) P5,217,263 (c) Non-current asset at December 31, 2016 and current asset at December 31, 2017 3-5. (Formatted Company)
(a) Carrying value of the note on January 1, 2016 (2 M x 2.2832) P4,566,400
Interest rate 15%
Interest revenue for 2016 P 684,960
Carrying value, January 1, 2017 (4,566,400 + 684,960 – 2M) P3,251,360
Interest rate 15%
Interest revenue for 2017 P 487,704
(b) Carrying value, January 1, 2016 P4,566,400
Add amortization of discount during 2016 684,960
Less first payment of principal (2,000,000)
Carrying value, December 31, 2016 P3,251,360
(c) Current Non-current Total
Principal due P2,000,000 P2,000,000 P4,000,000
Unamortized discount 487,704 260,936 748,640 Carrying amount, December 31, 2016 P1,512,296 P1,739,064 P3,251,360 3-6. (HRV Company)
(a) September 30, 2016 (1,000,000)+(3,000,000 x 12%) P1,360,000 September 30, 2017 (1,000,000)+(2,000,000 x 12%) P1,240,000 September 30, 2018 (1,000,000)+(1,000,000 x 12%) P1,120,000
(b) January 1 – September 30, 2016 (360,000 x 9/12) P 270,000 October 1 – December 31, 2016 (240,000 x 3/12) 60,000
Total interest revenue for 2016 P 330,000
(c) As of December 31, 2016 Current Non-current
Notes receivable P1,000,000 P1,000,000
Interest receivable (240,000 x 3/12) 60,000 3- 7. (Pinky Pop Company)
The note is interest-bearing, but the rate of interest of the note (5%) is unreasonably lower than the prevailing rate (10%) for similar obligation. The present value of the note is determined as follows: 2.5 M + (5% x 7.5 M) = 2,875,000 x 0.9091 P2,613,663 2.5 M + (5% x 5.0 M) = 2,750,000 x 0.8264 2,272,600 2.5 M + (5% x 2.5 M) = 2,625,000 x 0.7513 1,972,163 Total P6,858,426 or 2.5 M x 2.4869 P6,217,250 (5% x 7.5 M) x 0.9091 340,913 (5% x 5.0 M) x 0.8264 206,600 (5% x 2.5 M) x 0.7513 93,913 Total P6,858,676
(Note that the difference is due to the rounding off of present value factors) (a) Amortization Table
Date Payment of Principal Interest Paid Revenue Interest Amortization of Discount Carrying Value
01/01/16 6,858,426
12/31/16 2,500,000 375,000 685,843 310,843 4,669,269 12/31/17 2,500,000 250,000 466,927 216,927 2,386,196 12/31/18 2,500,000 125,000 238,804* 113,804* --- *difference is due to rounding off
(b) Journal entries 2016
Jan. 1 Notes Receivable 7,500,000
Discount on Notes Receivable 641,574
Gain on Sale of Land 858,426
Land 6,000,000
7,500,000 – 6,858,426 = 641,574 Discount 6,858,426 – 6,000,000 = 858,426 Gain
Dec. 31 Cash 2,875,000
Discount on Notes Receivable 310,843
Interest Revenue 685,843
Notes Receivable 2,500,000
2017
Dec. 31 Cash 2,750,000
Discount on Notes Receivable 216,927
Interest Revenue 466,927
Notes Receivable 2,500,000
2018
Dec. 31 Cash 2,625,000
Discount on Notes Receivable 113,804
Interest Revenue 238,804
3-8. (Pinky Pip Company)
The note is interest-bearing, but the rate of interest of the note (14%) is unreasonably higher than the prevailing rate (10%) for similar obligation. The present value of the note is determined as follows: 2.5 M + (14% x 7.5 M) = 3,550,000 x 0.9091 P3,227,305 2.5 M + (14% x 5.0 M) = 3,200,000 x 0.8264 2,644,480 2.5 M + (14% x 2.5 M) = 2,850,000 x 0.7513 2,141,205 Total P8,012,990 or 2.5 M x 2.48685 P6,217,125 (14% x 7.5 M) x 0.9091 954,555 (14% x 5.0 M) x 0.8264 578,480 (14% x 2.5 M) x 0.7513 262,955 Total P8,013,115
(Note that the difference in the computation is due to rounding off of present values) (a) Amortization Table
Date Payment of Principal Interest Paid Revenue Interest Amortization of Premium Carrying Value
01/01/16 8,012,990
12/31/16 2,500,000 1,050,000 801,299 248,701 5,264,289 12/31/17 2,500,000 700,000 526,429 173,571 2,590,718 12/31/18 2,500,000 350,000 259,282* 90,718* --- *Difference is due to rounding off
(b) Journal entries 2016
Jan. 1 Notes Receivable 7,500,000
Premium on Notes Receivable 512,990
Gain on Sale of Land 2,012,990
Land 6,000,000
8,012,990 – 7,500,000 = 512,990 Premium 8,247,955 – 6,000,000 = 2,247,955 Gain
Dec. 31 Cash 3,550,000
Premium on Notes Receivable 248,701
Interest Revenue 801,299
Notes Receivable 2,500,000
2017
Dec. 31 Cash 3,200,000
Premium on Notes Receivable 173,571
Interest Revenue 526,429
Notes Receivable 2,500,000
2018
Dec. 31 Cash 2,850,000
Premium on Notes Receivable 90,718
Interest Revenue 259,282
Notes Receivable 2,500,000
3-9. (Toyota Products, Inc.)
a. Accounts receivable 4,800,000 Sales 4,800,000 b. Cash 3,920,000 Sales discounts 80,000 Accounts receivable 4,000,000 c. Sales returns 60,000 Accounts receivable 60,000
d. Allowance for uncollectible accounts 20,000
e. Accounts receivable 5,000
Allowance for uncollectible accounts 5,000
Cash 5,000 Accounts receivable 5,000 f. Notes receivable 25,000 Accounts receivable 25,000 g. Cash 400,000 Notes payable-bank 400,000 Cash 150,000 Accounts receivable 150,000 Notes payable-bank 150,000 Cash 150,000
h. Uncollectible accounts expense 65,000
Allowance for uncollectible accounts 65,000
9,000 – 20,000 + 5,000 = 6,000 debit 59,000 + 6,000 = 65,000 i. Interest receivable 250 Interest revenue 250 25,000 x 12% x 30/360 Accounts receivable (450,000+4,800,000–4,000,000–60,000 - 20,000–25,000–150,000) P995,000 Less Allowance for uncollectible accounts 59,000
Amortized cost of accounts receivable P936,000 3-10. (Word Company)
Amounts reported in 2016 financial statements:
Uncollectible Accounts Expense P52,000 Allowance for Uncollectible Accounts 50,000 Required balance in allowance account:
(2% x 500,000) + (10% x 200,000) + (20% x 100,000) P50,000 Reported balance in allowance before adjustments (debit) 2,000 Required adjustment charged to uncollectible accounts expense P52,000 3-11. (Edit Company)
Allowance for Uncollectible Accounts, beg P 6,000
Recovery of accounts previously written off 3,000
Uncollectible accounts expense for 2016 48,000
Allowance for Uncollectible Accounts, end (12,000)
Accounts written off during 2016 P45,000
3-12. (Rav, Inc.)
Accounts Receivable, December 31, 2015 P 337,000
Transactions during 2016
Sales on account 1,500,000
Cash received from customers (1,600,000)
Cash discounts allowed: (882,000 ÷ 98%) x 2% P18,000
(495,000 ÷ 99%) x 1% 5,000 (23,000) Recovery of accounts written off 3,000
Accounts written off as worthless (11,000)
Credit memoranda for sales returns (6,000)
Accounts Receivable, December 31, 2016 P 200,000
Allowance for Uncollectible Accounts, December 31, 2015 P 12,000 Recovery of accounts written off 3,000
Accounts written off as worthless (11,000)
Impairment loss on receivables 15,000
The computation may also be conveniently done through T-accounts, as follows: Accounts Receivable
Balance, beg 337,000 Collections 1,600,000
Sales on account 1,500,000 Cash discounts 23,000
Recovery 3,000 Write off 11,000
Sales returns 6,000
Total 1,840,000 Total 1,640,000
Balance, end 200,000
Allowance for Uncollectible Accounts
Write off 11,000 Balance, beg 12,000
Recovery 3,000
Impairment 15,000
Total 11,000 Total 30,000
Balance, end 19,000
3-13. (Revo Company)
(a) Allowance for Uncollectible Accounts, January 1, 2016 P 34,000
Accounts written off (47,000)
Recovery of accounts previously written off 7,000
Additional accounts written off (6,000)
Allowance for Uncollectible Accounts, December 31, 2016
before adjustments (debit balance) (P12,000) Required balance in Allowance account based on aging
(5% x 240,000) + (25% x 20,000) + (50% x 30,000) + (90% x 24,000) 53,600 Required adjustment/Uncollectible Accounts Expense for 2016 P65,600
(b) Accounts Receivable, December 31, 2016 P654,000
Less Allowance for Uncollectible Accounts 53,600
Net amortized cost P600,400
3-14. (Adventure Company)
(a) Accounts Receivable, January 1 P 1,200,000
Transactions during 2016
Sales 10,000,000
Cash collected from customers (8,720,000) Recovery of accounts previously written off 20,000 Note received in settlement of an account ( 400,000) Accounts written off as worthless ( 100,000)
Accounts Receivable, December 31 P 2,000,000
Accounts Receivable, December 31 P 2,000,000
Past due accounts 600,000
Current accounts/Not yet past due P 1,400,000
Adjusted balance of Allowance for Uncollectible Accounts
20% x 600,000 past due accounts P 120,000 5% x 1,400,000 current accounts 70,000
Total P 190,000
(b) Adjusted Allowance for Uncollectible Accounts, Dec. 31, 2016 P190,000 Accounts written off during the year as worthless 100,000 Recovery of accounts previously written off (20,000) Allowance for Uncollectible Accounts, January 1, 2016 (60,000) Uncollectible Accounts Expense for year 2016 P210,000
(c) Accounts Receivable P2,000,000
Less Allowance for Uncollectible Accounts 190,000 Amortized cost of accounts receivable, December 31, 2016 P1,810,000
3-15. (Maynilad Bank) Alternative 1
Carrying value (10 M + 1M) 11,000,000
Present value of future cash inflows:
Principal due on 12/31/18 (9M x 0.8264) P7,437,600 Interest for 2 years
9M x 8% = 720,000; 720,000 x 1.7355 1,249,560 8,687,160
Impairment loss P2,312,840
Entry: Restructured Notes Receivable 8,687,160 Impairment Loss – Receivables 2,312,840
Notes Receivable 10,000,000
Interest Receivable 1,000,000
Alternative 2
Carrying value (10 M + 1M) 11,000,000
Present value of future cash inflows:
2M + (8% x 10M) = 2,800,000 x 0.9091 2,545,480 2M + (8% x 8M) = 2,640,000 x 0.8264 2,181,696 2M + (8% x 6M) = 2,480,000 x 0.7513 1,863,224 2M + (8% x 4M) = 2,320,000 x 0.6830 1,584,560 2M + (8% x 2M) = 2,160,000 x 0.6209 1,341,144 9,516,104 Impairment loss 1,483,896
Entry: Restructured Notes Receivable 9,516,104 Impairment Loss – Receivables 1,483,896
Notes Receivable 10,000,000
Interest Receivable 1,000,000
Alternative 3
Carrying value 10,000,000
Present value of future cash inflows:
Principal due on 12/31/18 (10M x 0.8264) 8,264,000 Interest due on 12/31/17 and 12/31/18
10M x 7% = 700,000; 700,000 x 1.7355 1,214,850 9,478,850
Impairment loss 521,150
Entry: Restructured Notes Receivable 9,478,850 Impairment Loss – Receivables 521,150
Notes Receivable 10,000,000
Cash 1,200,000
Interest Receivable 1,200,000
Alternative 4
Carrying value 11,000,000
Present value of future cash inflows:
Principal due on 12/31/18 (11M x 0.82644628) 9,090,909 Interest due on 12/31/17 and 12/31/18
11M x 10% = 1,100,000;
1,100,000 x 1.73553719 1,909,091 11,000,000
No impairment loss -0-
No entry is required for the restructuring.
3-16. (Kate Company)
(a) Cash 750,000
Notes Payable – National Bank 750,000
(b) Current assets:
Trade and other receivables (including P900,000 of accounts
pledged as collateral for a loan with National Bank) P3,000,000 Current liabilities:
Notes Payable – National Bank P 750,000 Interest Payable 7,500 3-17. (Lexus Company)
Sept. 1 Accounts Receivable Assigned 800,000
Accounts Receivable 800,000
Cash 634,000
Finance Charges 16,000
Notes Payable – Pacific Bank 650,000
Amount of the loan P650,000
Less service charge (2% x 800,000) 16,000 Net proceeds from the assignment
of accounts receivable P634,000
Sept 1-30 Cash 300,000
Accounts Receivable Assigned 300,000
Sept. 30 Notes Payable – Pacific Bank 300,000
Interest Expense 6,500
Cash 306,500
650,000 x 12% x 1/12 = 6,500
Oct. 1-31 Allowance for Uncollectible Accounts 10,000
Accounts Receivable Assigned 10,000
Cash 400,000
Accounts Receivable Assigned 400,000
Oct. 31 Notes Payable – Pacific Bank 350,000
Interest Expense 3,500
Cash 353,500
350,000 x 12% x 1/12 = 3,500
31 Accounts Receivable 90,000
Accounts Receivable Assigned 90,000
3-18. Accord Company)
July 1 Accounts Receivable Assigned 5,000,000
Accounts Receivable 5,000,000
1 Cash 3,800,000
Finance Charges 200,000
Notes Payable – Bank 4,000,000
5% x 4,000,000 = 200,000
21 Sales Returns and Allowances 200,000
Accounts Receivable Assigned 200,000
31 Cash 2,450,000
Sales Discounts 50,000
Accounts Receivable Assigned 2,500,000
2% x 2,500,000 = 50,000
Aug. 1 Notes Payable – Bank 2,500,000
Interest Expense 40,000
Cash 2,540,000
Aug. 15 Allowance for Uncollectible Accounts 50,000
Accounts Receivable Assigned 50,000
31 Cash 2,000,000
Accounts Receivable Assigned 2,000,000
Sept. 1 Notes Payable – Bank 1,500,000
Interest Expense 15,000
Cash 1,515,000
1.5M x .12 x 1/12 = 15,000
1 Accounts Receivable 250,000
Accounts Receivable Assigned 250,000
3–19. (Fortune Company)
Oct. 1 Accounts Receivable Assigned 2,000,000
Accounts Receivable 2,000,000 1 Cash 1,410,000 Finance Charges 90,000 Notes Payable 1,500,000 31 Interest Expense 15,000 Notes Payable 985,000
Accounts Receivable Assigned 1,000,000
1.5M x .12 x 1/12 = 15,000
Nov. 30 Notes Payable 515,000
Interest Expense 5,150
Cash 279,850
Accounts Receivable Assigned
515,000 x 0.12 x 1/12 = 5,150 800,000
30 Accounts Receivable 200,000
Accounts Receivable Assigned 200,000 3-20. (Highlander Company)
(a)
Sept. 1 Cash 684,000
Receivable from Factor 36,000
Loss from Factoring 80,000
Accounts Receivable 800,000 800,000 x 10% =80,000 Loss; 720,000 x 5% = 36,000 withheld Nov. 1 Cash 582,000 Finance Charges 18,000 Notes Payable-Bank 600,000 3% x 600,000 = 18,000 (b)
Dec. 31 Uncollectible Accounts Expense 11,600
Allowance for Uncollectible Accounts 11,600
(250,000 + 1,000,000) x 2% = 25,000 – 13,400 3-21. (Hiku Company)
(a) Selling price of Accounts Receivable (90% x P1,200,000) P1,080,000 Factor’s holdback (6% x 1,080,000) (64,800)
Cash received from factoring P1,015,200
(b) Accounts receivable assigned balance (500,000 – 350,000) P 150,000 Balance of notes payable to the bank
400,000 – (350,000 – 4,000) (54,000)
(c) Face value of note discounted P 50,000 Interest for the full term April 30 – August 28
(50,000 x 9% x 120/360) 1,500
Maturity value P 51,500
Discount (51,500 x 10% x 88/360) (1,259)
Proceeds P 50,241
3-22. (Edsamail Company)
(a) Maturity value = 500,000 + (500,000 x .08) = 540,000
Proceeds = 540,000 – (540,000 x 0.10 x 5/12) = 517,500
(b) Interest Receivable 23,333
Interest Revenue 23,333
500,000 x 8% x 7/12
Cash 517,500
Loss on Sale of Notes Receivable 5,833
Notes Receivable 500,000
Interest Receivable 23,333
(c) Cash 517,500
Liability on Discounted Notes 517,500
3-23. a. Proceeds 90,000 – (90,000 x 0.10 x 20/365) = P89,507
Cash 89,507
Liability on Discounted Notes 89,507
b. Maturity value 75,000 + (75,000 x 0.09 x 90/365)= P76,664
Proceeds 76,664 – (76,664 x 0.10 x 50/365) = P75,614
Cash 75,614
Liability on Discounted Notes 75,614
c. Maturity value 60,000 + (60,000 x 0.12 x 120/365)= P62,367
Proceeds 62,367 – (62,367 x 0.10 x 45/365) = P61,598
Cash 61,598
Liability on Discounted Notes 61,598
3-24. (Crosswind Corporation)
2016
Feb. 1 Notes Receivable 360,000
Accounts Receivable 360,000
Apr. 1 Cash 359,910
Liability on Discounted Notes 359,910
360,000 + (360,000 x .10 x 9/12) = 387,000 387,000 – (387,000 x .12 x 7/12) = 359,910
Nov. 2 Liability on Discounted Notes 359,910
Interest Expense 27,090 Notes Receivable 360,000 Interest Revenue 27,000 387,000 x .12 x 7/12 = 27,090 360,000 X .10 X 9/12 = 27,000 2 Accounts Receivable 407,000 Cash 407,000 387,000 + 20,000
3-25. (Explorer Company) (a)
Accounts receivable factored P2,000,000
Purchase price 85%
Purchase price of accounts receivable factored P 1,700,000
Less amount withheld (5% x 1,700,000) 85,000
Net cash received from the factored accounts P 1,615,000
(b)
Cash 1,615,000
Receivable from Factor 85,000
Loss on Factoring 300,000
Accounts Receivable 2,000,000
Sales Returns 30,000
Receivable from Factor 30,000
Cash 55,000
Receivable from Factor 55,000
3-26. (Nature Company) (a) 1/1/16 Interest Revenue 2,800 Interest Receivable 2,800 (1) Accounts Receivable 3,000,000 Sales 3,000,000 (2) Cash 2,250,000 Sales Discounts 18,000 Accounts Receivable (2,218,000 – 180,000)* 2,088,000
Accounts Receivable Assigned * 180,000
*See Item (9) (3) Notes Receivable 250,000 Accounts Receivable 250,000 (4) Cash 216,000 Notes Receivable 200,000 Interest Revenue 16,000 (5) Cash 41,400
Liability on Discounted Notes 41,400
Liability on Discounted Notes 41,400
Interest expense 4,600
Notes Receivable 40,000
Interest revenue 6,000
(6) Accounts Receivable Assigned 300,000
Accounts Receivable 300,000 Cash 222,000 Finance Charges 18,000 Notes Payable 240,000 (7) Accounts Receivable 15,900 Notes Receivable 15,000 Interest Revenue 900
(8) Allowance for Uncollectible Accounts 12,000
Accounts Receivable 12,000
(9) Notes Payable 180,000
Interest Expense 3,000
Cash 183,000
(10) Uncollectible Accounts Expense 30,000
Allowance for Uncollectible Accounts 30,000
30,000 – (12,000 – 12,000 )
(11) Interest Receivable 3,200
(b) Trade and Other Receivables include the following:
Notes Receivable P 95,000
Accounts Receivable – Unassigned 977,900 Accounts Receivable - Assigned 120,000
Interest Receivable 3,200
Allowance for Uncollectible Accounts (30,000)
Total P1,166,100
MULTIPLE CHOICE QUESTIONS Theory MC1 A MC11 C MC2 B MC12 A MC3 A MC13 C MC4 A MC14 D MC5 C MC15 A MC6 A MC16 D MC7 D MC17 A MC8 A MC18 C MC9 C MC10 C Problems MC19 B Sales on account (450,000 x 1.4) P630,000
Cash received from credit customers 585,000
Accounts receivable balance, end P 45,000
MC20 D Invoice price (105,000 x .90) P94,500 Cash discount (2% x 94,500) (1,890) Net price P92,610 MC21 C Invoice price (200,000 x .90 x .95) P171,000 Cash discount (3% x 171,000) (5,130) Net price P165,870
MC22 B Accounts receivable, beginning P1,300,000
Credit sales for the year 5,400,000
Collections from customers, including recoveries of P25,000 (4,750,000)
Recoveries of accounts previously written off 25,000
Accounts written off (125,000)
Accounts receivable, ending P1,850,000
MC23 B Accounts receivable balance, beginning P80,000
Sales for the year
Cost of goods available for sale P460,000 Merchandise inventory, end (100,000) Cost of goods sold P360,000
Sales (360,000 ÷ 80%) 450,000
Collections on accounts receivable (430,000)
Accounts receivable, ending P100,000
MC24 D Allowance for uncollectible accounts balance before adjustment (debit) P45,000 Required allowance balance based on aging analysis 75,000
Uncollectible accounts expense for the year P120,000
MC26 C Allowance for bad debts balance before adjustment (debit) P8,000
Required allowance balance (see MC 25) 30,000
Uncollectible accounts expense P38,000
MC27 D Allowance balance, end (270,000 – 250,000) P20,000
Accounts written off 23,000
Uncollectible accounts recovery during the year (5,000)
Allowance balance, beginning (28,000)
Bad debts expense for the year P10,000
MC28 B Allowance for uncollectible accounts, beginning P17,500
Write off of uncollectible accounts (30,500)
Recoveries of uncollectible accounts written off in prior years 8,050 Provision for uncollectible accounts during the year 20,000
Allowance for uncollectible accounts, ending P15,050
MC29 B Accounts receivable, beginning P480,000
Sales on account 2,400,000
Cash received from customers (2,560,000)
Accounts written off (17,600)
Cash discounts granted
(1,411,200 ÷ .98 = 1,440,000 x 2%) + (792,000 ÷ .99 = 800,000 x 1%) (36,800)
Recovery of accounts written off 4,800
Accounts receivable, end P270,400
MC30 A Allowance for bad debts, January 1 P19,200
Recovery of accounts written off 4,800
Accounts written off (17,600
Allowance for bad debts, December 31, before adjustment (credit) P6,400 Required balance of allowance for bad debts (5% of 270,400) 13,520
Bad debts expense for the year P 7,120
MC31 A 0-30 days (5% x 600,000) 31-60 days (10% x 40,000) Over 60 days P30,000 4,000 14,000
Allowance for uncollectible accounts, March 31 P48,000
MC32 B Allowance for uncollectible accounts, ending (500,000 – 480,000) P20,000
Uncollectible accounts written off 7,500
Recoveries of accounts previously written off (3,700)
Allowance for uncollectible accounts, beginning (375,000 – 362,500) (12,500)
Uncollectible accounts expense for the year P11,300
MC33 D Maturity value (50,000 x 10%) + 50,000 P55,000
Discount (55,000 x 12% x 6/12) 3,300
Proceed from discounting P51,700
MC34 C Present value of note (400,000 x 0.75) = 300,000
Interest income (300,000 x 10%) P30,000
MC35 C Carrying amount, January 1 P300,000
Amortization of discount 30,000
Carrying amount, December 31 P330,000
MC36 C Interest revenue (1,940,000 x 13.4% x 1/12) P21,663
MC38 C Amount of reduction in principal in 2018 P659,895 Accrued interest at December 31, 2017 (242,605 x 6/12) 121,303
Total current receivable at December 31, 2017 P781,198
(See complete amortization table below) MC39 C January 1 – June 30 (308,000 x 6/12)
July 1 – December 31(242,605 x 6/12) P275,303
Date Annual payment Interest income Reduction in principal Balance
July 1, 2016 2,800,000 July 1, 2017 902,500 11% x 2,800,000=308,000 902,500-308,000=594,500 2,205,500 July 1, 2018 902,500 11% x 2,205,500=242,605 902,500-242,605=659,895 1,545,605 July 1, 2019 902,500 11% x 1,545,605=170,017 902,500-170,017=732,483 813,122 July 1, 2020 902,500 902,500-813,122=89,378 813,122 -0- MC40 B Maturity value 500,000 + (500,000 x 8%) Discount (540,000 x 10% x 8/12) P540,000 (36,000)
Proceeds from discounting P504,000
MC41 B Proceeds from factoring P695,000
Proceeds from assignment 1,250,000 – (2% x 1,250,000) 1,225,000 Proceeds from factoring and assignment of accounts receivable P1,920,000 MC42 D Required balance in allowance account (500,000 + 2.2M) x 3% P81,000
Allowance balance before adjustment (32,000)
Bad debt expense for the year P49,000
MC43 C Carrying value of the note (500,000 + 50,000) P550,000
Present value of restructured notes receivable
500,000 x 0.8265 413,250
500,000 x 8% = 40,000; 40,000 x 1.7355 69,420 482,670
Impairment loss P 67,330
MC44 A Carrying value of the note P5,500,000
Present value of restructured notes receivable
4,000,000 x .83 3,320,000
4.0M x 8% = 320,000; 320,000 x 1.74 556,800 3,876,800
Impairment loss P1,623,200
