CHAPTER 4 RECEIVABLES AND RELATED REVENUES Problem 2 (Magnolia Company) 1. Accounts Payable B Accounts Receivable B 2.

2. Accounts Receivable L Accounts Receivable C 3. No disposition yet (Customer D) 4. Sales Accounts Receivable E 5. Inventory Cost of Sales 6. Sales Accounts Receivable F Advances from Customers 7. Inventory Cost of Sales 24,000 24,000 16,500 16,500 60,000 15,000 45,000 59,000 59,000 74,000 74,000 16,200 16,200

8. Sales 2,500 Accounts Receivable H 10,000 / 200 x (200 150) = 2500 9. Sales Accounts Receivable I 10. Inventory Cost of Sales 11. Sales Returns and Allowances Sales

2,500

180,000 180,000 120,000 120,000 5,000 5,000

Problem 3 (Blooms Company) Account 1 2 3 4 5 6 Total Per Client 12,000 22,000 97,600 20,000 55,000 7,500 215,300 (98,800) 20,000 55,000 7,500 116,000 10,000 2,220 27,220 52,780 7,500 68,280 10,000 Adjustment Per Audit 12,000 22,000 Not due 3,000 P a s t 1-60 days 8,000 D u e 61-120 Over 120 days days 1,000

11,000

10,000

Age Classification Not due 1-60 days past due 61-120 days past due Over 120 days past due Total

Balance per Audit % Uncollectible 27,220 1% 68,280 2% 11,000 5% 10,000 50%

Required Allowance 272.20 1,365.60 550.00 5,000.00 7,187.80

Note Receivable 100,000 Interest income Accounts receivable (customer 3) Interest Receivable Interest income 500

2,400 97,600

500

Uncollectible Accounts Expense 2,188 Allowance for Doubtful Accounts 7,188 5,000 = 2,188

2,188

MEEMEE, INC. Adjusting Entries: 1. Miscellaneous Expenses Receivables from Officers & Employees Cash Petty Cash Fund 2. Other Non-Current Financial Assets Cash in Bank Interest Income Reclassified Security Bank SA

1,260 500 1,760 400,625 400,000 625

3. Cash in Bank BPI SA Interest Income 4. Accounts Receivable 31-60 days overdue Cash in Bank BPI SA 5. Accounts Receivable Dishonored Notes Cash in Bank BPI SA Notes Receivable Discounted Notes Receivable 6. Cash in Bank BPI CA Payroll Accrued Payroll 5,200 + 10,400 7. Miscellaneous Expenses Cash in Bank BPI CA

394 394 12,800 12,800 5,500 5,500 5,000 5,000 15,600 15,600

150 Payroll 45,200 45,200 900 150 1,050 9,000 4,800 13,800 2,000 2,000 150

8. Cash in Bank BPI CA General Accounts Payable 9. Accounts Payable Miscellanous Expenses Cash in Bank BPI CA General 10. Accounts Receivable Current Accounts Receivable 31-60 days overdue Customers Credit Balances 11. Receivables from Officers and Employees Accounts Receivable Current

12. Allowance for Bad Debts Accounts Receivable over 90 days 13. Accounts Receivable Overdue Notes Notes Receivable Interest Income 14. Receivable from Officers and Employees Notes Receivable 15. Interest Receivable Interest Income Creative: P 10,000 x 24% x 64/360 = 427 President: P 6,800 x 25% x 19/360 = 90 Total 517 16. Allowance for Bad Debts Bad Debts Expense

5,000 5,000 15,250 15,000 250 6,800 6,800 517 517

4,543 4,543

Analysis of Accounts Receivable Age Class Per Client Adjustment Current 362,412 9,000 (2,000) 1-30 days past due 202,895 4,550 31-60 days past due 130,480 12,800 4,800 61-90 days past due 17,500 Over 90 days past 11,387 (5,000) due Dishonored notes 5,500 15,250 Total required allow Balance of allow. Adjustment

Per Audit 369,412 207,445 148,080 17,500 6,387 20,750

% Uncollectible % 1% 3% 10% 50% 20%

Req. Allow. 1,847 2,074 4,442 1,750 3,194 4,150 17,457 22,500 (4,543)

Answers: a) Petty cash b) BPI SA depository c) BPI CA Payroll d) BPI CA Gen Disb. e) Security Bank SA f) Cash g) Accounts Recbl (gross) h) Allow for Bad Debts i) Bad Debts Expense

8,240 257,794 76,250 214,150 400,625 556,434 769,574 17,457 19,457

j) k) l) m) n) o)

Notes Receivable 18,000 Liab of Discounted Notes 8,000 Interest Receivable 517 Interest Income 4,586 Receivables from Officers & Employees 9,700 Customer Credit Balances 13,800