College of Business Administration

ACTG 109A – APPLIED AUDITING

Audit of Receivables

NAME:_____________________________________________COURSE & YEAR: __________________

1. Red Co. had P3 million in accounts receivable recorded on its books. Red wanted to convert the P3 million in
receivables to cash in a more timely manner than waiting the 45 days for payment as indicated on its invoices.
Which of the following would alter the timing of Red's cash flows for the P3 million in receivables already recorded
on its books?
a. Change the due date of the invoice.
b. Factor the receivables outstanding.
c. Discount the receivables outstanding.
d. Demand payment from customers before the due date.

Tigasin Company required additional cash for its operation and used accounts receivable to raise such needed
cash, as follows:
 On December1, 2010 Tigasin Company assigned on a non-notification basis accounts receivable of
P5,000,000 to a bank in consideration for a loan of 90% of the receivables less than a 5% service fee
on the accounts assigned. Tigasin signed a note for the bank loan. On December 31, 2010, Tigasin
collected assigned accounts of P3,000,000 less discount of P200,000. Tigasin remitted the collections
to the bank in partial payment for the loan. The bank applied first the collection to the interest and the
balance to the principal. The agreed interest is 1% per month on the loan balance.
 Tigasin Co. sold P1,550,000 of accounts receivable for P1,340,000. The receivables had a carrying
amount of P1,470,000 and were sold outright on a nonrecourse basis.
 Tigasin Co. received an advance of P300,000 from Union Bank by pledging P360,000 of accounts
receivable.
 On June 30, 2010, Tigasin Co. discounted at a bank a customer’s P600,000, 6-month, 10% note
receivable dated April 30, 2010. The bank discounted the note at 12% on the same date.

2. In its December 31, 2010 statement of financial position, Tigasin should report note payable as a current
liability at? 1,745,000
3. Tigasin Company’s equity in the assigned accounts receivable as of December 31, 2010 is? 255,000
4. Journal entries in recording the sale of accounts receivable
Cash 1,340,000
ADA 80,000
Loss on factoring 130,000
Accts Receivable 1,550,000
5. The proceeds from the note receivable discounted on June 30, 2010? 604,800

6. On October 31, 2015, Kevin Company engaged in the following transactions:

 Obtained a P500,000, six-month loan from City Bank, discounted at 12%. The company pledged
P500,000 of accounts receivable as security for the loan.
 Factored P1,000,000 of accounts receivable without recourse on a non-notification basis with
Gru Company. Gru charged a factoring fee of 2% of the amount of receivables factored and
withheld 10% of the amount factored.
What is the total cash received from the financing of receivables? P1,350,000

7. Isaac Co. assigned P500,000 of accounts receivable to Dixon Finance Co. as security for a loan of P420,000.
Dixon charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During the
first month, Isaac collected P110,000 on assigned accounts after deducting P380 of discounts. Isaac accepted
returns worth P1,350 and wrote off assigned accounts totalling P3,700. The amount of cash Isaac received from
Dixon at the time of the transfer was? P411,600

8. On September 30, 2015, Bay Company discounted at the bank a customer P6,000,000, 12-month, 10% note
receivable dated July 31, 2015. The bank discounted the note at 12% without recourse. The loss on discounting
the note receivable to be presented in the statement of financial position is? P0

Page 1 “Libyae Lustare”