Receivables

Problem 1
The accounts receivable of FRANCO COMPANY we’re stated at P1,467,000 in a balance sheet submitted to a banker for
credit. You are called upon to audit the report and, upon analysis, the asset was found to consist of the following items:

Due from customers on open account P 1,125,000

Acknowledged claim for damages 22,500
Due from consignee at billed price – cost price
being P22,500 30,000
Investment in and advances to affiliated company 150,000
Loans to officers and employees 13,500
Deposits with municipalities – bids for contracts 67,500
Unpaid capital stock subscriptions 60,000
Advances to creditors for merchandise purchased
but not received 24,000
Cash advanced to salesmen for traveling expenses 4,500
Allowance for doubtful accounts ( 30,000)
P1,467,000

The amount of P1,125,000 due from customers was the remaining balance after deducting accounts with credit balances of
P6,000.

During your examination, you noted that on December 31, the company assigned P300,000 of customers’ accounts to secure
a 17%, P240,000 note payable. A 1% commission based on the accounts assigned was charged and deducted from the cash
received. The client recorded this transaction by a debit to cash and a credit to notes payable.

Questions

1. How much is the Accounts Receivable (gross) balance at December 31?

a. P 759,000 b. P 789,000 c. P 1,101,000 d. P 1,131,000

2. The total current non-trade receivable balance at December 31 is:

a. P 64,500 b. P 96,000 c. P 120,000 d. P 192,000

3. The liability for the accounts receivable – assigned is:

a. P 237,000 b. P 240,000 c. P 243,000 d. P 300,000

4. The total non-trade receivable balance at December 31 is:

a. P 342,000 b. P 318,000 c. P 313,500 d. P 245,000
Problem 2
In your audit of MENDOZA COMPANY for the past calendar year, you find the following accounts:
ACCOUNTS RECEIVABLES

Jan. 1, 2002 P 800,000 Jan. – Dec. 1992 collections P 5,900,000

Jan. – Dec. Sales 6,300,000 Jan. – Dec. write-off 100,000

ALLOWANCE FOR BAD DEBTS

Jan. – Dec. Write-off of Jan. 1, 2002 P 95,000
last year’s receivables P 85,000 Dec. 31 provisions 315,000

Write-off of this year’s

Receivables 15,000

In your examination, you find that the balance of Accounts Receivable represents sales of the current audit year only; that
credit balances in the subsidiary ledger for accounts receivable totaled P80,000; and that the current year’s provision for bad
debts expense was 5% of sales (as compared with 4½% last year, 4% of the year before, and 3½% the next previous year).
Sequential to aging the accounts receivable, you and the company’s treasurer agree on an additional write-off of P50,000,
and P300,000 as the probable loss to be sustained on collection of the accounts receivable balance.

Questions

1. The adjusted Accounts Receivable balance is:

a. P 830,000 b. P 1,100,000 c. P 1,130,000 d. P 1,180,000

2. The adjusted Allowance for Bad Debts is:

a. P 260,000 b. P 300,000 c. P 315,000 d. P 355,000

3. The adjusted Bad Debts account is:

a. P 260,000 b. P 300,000 c. P
b. 315,000 d. P 355,000

4. The provision per record at December 31 is:

a. P 260,000 b. P 300,000 c. P 315,000 d. P 355,000

Problem 3
The following selected transactions occurred during the year ended December 31, 2006 of DOMINGO COMPANY:

Gross sales (cash and credit) P 900,736.80

Collections from credit customers, net of 2% cash discount 294,000.00
Cash sales 180,000.00
Uncollectible accounts written off 19,200.00
Credit memos issued to credit customers for sales ret./allow. 10,080.00
Cash refunds given to cash customers for sales ret./allow. 15,168.00
Recoveries on accounts receivable written-off in prior years
(not included in cash received stated above) 6,505.20
At year-end, the company provides for estimated bad debts losses by crediting the Allowance for Bad Debts account for 2%
of its net credit sales for the year. The allowance for bad debts at the beginning of the year is P19,327.20.

Questions

1. How much is the DOMINGO COMPANY’s gross sales?

a. P 900,736.80 b. P 720,736.80 c. P 704,656.80 d. P 689,488.80
2. DOMINGO COMPANY’s credit sales at December 31, 2006 is:
a. P 900,736.80 b. P 720,736.80 c. P 704,656.80 d. P 689,488.80

3. How much is the DOMINGO COMPANY’s net credit sales?

a. P 900,736.80 b. P 720,736.80 c. P 704,656.80 d. P 689,488.80

4. The Bad Debts Expense of DOMINGO COMPANY at December 31, 2006 is:
a. P 20,725.54 b. P 14,093.14 c. P 8,030.74 d. P7,829.14

5. The Accounts Receivable of DOMINGO COMPANY at December31, 2006 is:

a. P 408,042.00 b. P 407,536.80 c. P 401,536.80 d. P 391,456.80

6. The Allowance for Bad Debts of DOMINGO COMPANY at December 31, 2006 is:
a. P 20,725.54 b. P 14,093.14 c. P 8,030.74 d. P7,829.14

Problem 4
Presented below are unaudited balances of selected accounts of MARJORIE COMPANY as of December 31, 2006:
Unaudited Balances, 12/31/06
Selected Accounts Debit Credit
Cash P 500,000
Accounts receivable 1,300,000
Allowance for doubtful accounts 8,000
Net sales P 6,750,000
Additional information are as follows:

a. Goods amounting to P50,000 were invoiced for the accounts of Joy Store & Co., recorded on January 2, 2007 with terms
of net, 60 days, FOB shipping point. The goods were shipped to Variety Store on December 30, 2006.

b. The bank returned on December 29, 2006, a customer’s check for P5,000 marked “DAIF”, but no entry was made.

c. MARJORIE COMPANY estimates that allowance for uncollectible accounts should be one and one-half percent (1½%)
of the accounts receivable balance as of year-end. No provision has yet been made for 2006.

Questions
1. What is the adjusted balance of Accounts Receivable on December 31, 2006?
a. P 1,355,000 b. P 1,350,000 c. P 1,305,000 d. P 1,300,000

2. What is the adjusted balance of Allowance for doubtful accounts on December 31, 2006?
a. P 36,325 b. P 28,325 c. P 20,325 d. P 8,000
3. What is the adjusted amount of 2006 Bad Debts Expense?
a. P 12,325 b. P 20,325 c. P 28,325 d. P 36,325

Problem 5
During December, 2006, the Accounts Receivable controlling account on the books of FERNANDEZ COMPANY showed one
debit posting and two credit postings. The debit represents receivables from December sales, P780,000. One credit was for
P470,400, made a result of cash collections on November and December receivables; the second credit was an adjustment
for estimated uncollectibles, P90,000. The December 31 balance was P270,000.

When receivables were collected, the bookkeeper credited Accounts Receivables for the cash collected. All customers who
paid their accounts during December took advantage of the 2% cash discount.

As of December 1, debit balance in customers’ subsidiary accounts totaled P177,000. An adjustment for estimated doubtful
accounts of P18,000 had been posted to the Accounts Receivable controlling account at the end of 2002, and no write-offs
were recorded during 2006. In addition, a number of customers had overpaid their accounts, and as a result, some of the
customers’ subsidiary accounts had credit balances on December 1. No overpayments were made during December nor
were any credit balances in customers’ accounts reduced during December.

Questions

1. The Accounts Receivable beginning balance (unadjusted) of FERNANDEZ COMPANY at December 31, 2006 is:
a. P 50,400 b. P 68,400 c. P 252,000 d. P 270,000

2. The Accounts Receivable beginning balance (adjusted) of FERNANDEZ COMPANY at December 31, 2006 is:
a. P 50,400 b. P 68,400 c. P 252,000 d. P 270,000

3. The Credit Balance of Accounts Receivable at the beginning of the year of FERNANDEZ COMPANY is:
a. P 48,600 b. P 66,600 c. P 108,600 d. P 126,600

4. The Accounts Receivable balance of FERNANDEZ COMPANY at December 31, 2006 is:
a. P 50,400 b. P 68,400 c. P 252,000 d. P 270,000

Problem 6
You are examining the financial statements of MATIAS CORPORATION for the year ended December 31, 2006. During the
audit of the accounts receivable and other related accounts, certain information was obtained.

The December 31, 2006 debit balance in the Accounts Receivable control account is P197,000.

The only entries in the Bad Debts Expense account were: a credit for P324 on December 31, 2006, because Marlisa Company
remitted in full for the accounts charged off October 31, 2006, and a debit on December 31 for the amount of the credit to the
Allowance for Doubtful Accounts.
The Allowance for Doubtful Accounts schedule is presented below:
Debit Credit Balance
January 1, 2006 P 3,658
October 21, 2006, Uncollectible;
Marlisa Co., - P324; Abonales Co.,
- P 820; Cherryl Co., - P564 P 1,508 2,150
December 31, 2006, 5% of P197,000 P 9,850 12,000
An aging schedule of the accounts receivable as of December 31, 2006 and the decision are shown in the table below:

Age Net Debit Balance Amount to which the Allow.

is to be adjusted after adjust.
____________ _________________ and corrections have been made

0 – 1 month P 93,240 1 percent

1 – 3 months 76,820 2 percent
3 – 6 months 22,180 3 percent
over 6 months 6,000 Definitely uncollectible, P1,000;
P2,000 is considered 50 uncollectible; the remainder is estimated to be 80% collectible.

There is a credit balance in one account receivable (0-1 month) of P2,000; it represents an advance on a sales contract. Also,
there is a credit balance in one of the 1-3 months accounts receivable of P500 for which merchandise will be accepted by the
customer.

The ledger accounts have not been closed as of December 31, 2006. The Accounts Receivable control account is not in
agreement with the subsidiary ledger. The difference cannot be located, and the auditor decides to adjust the control to the
sum of the subsidiaries after corrections are made.

Questions

1. The adjusted balance of accounts receivable of MATIAS CORPORATION at December 31, 2006 is:
a. P 199,740 b. P 199,540 c. P 198,300 d. P 198,100

2. The adjusted write-off of accounts receivable balance of MATIAS CORPORATION at December 31, 2006 is:
a. P 2,708.00 b. P 2,508.00 c. P 2,384.00 d. P 1,708.00

3. The adjusted allowance of bad debts account of MATIAS CORPORATION at December 31, 2006 is:
a. P 4,980.60 b. P 4,964.20 c. P 4,780.60 d. P 4,764.20

4. The bad debts expense per book of MATIAS CORPORATION at December 31, 2006 is:
a. P 9,850.00 c. P 4,764.20
b. P 6,359.80 d. Cannot be determined

5. The adjusted bad debts expense of MATIAS CORPORATION at December 31, 2006 is:
a. P 3,814.20 b. P 3,614.20 c. P 3,490.20 d. P 2,814.20

6. The entry to adjust the account of Marlisa Company is:

a. Bad debts 324 c. Allow. for BD 324
Allow. for BD 324 Bad debts 324
b. Bad debts 324 d. Accounts receivable. 324
 Accounts receivable 324 Bad debts 324

7. The entry to reconcile the accounts receivable control ledger to subsidiary ledger is:
a. Accounts receivable 1,440 c. Accounts receiv. 1,440
Allow. for BD 1,440 Misc. income 1,440
b. Allow. for BD 1,440 d. No adjustment
Accounts receivable 1,440

8. The net realizable value of accounts receivable of MATIAS CORPORATION at December 31, 2006 is:
a. P 194,975.80 b. P 194,775.80 c. P 193,335.80 d.P193,319.40

Problem 7
You are auditing the Accounts Receivable and the related Allowance for Bad Debts account of ROY COMPANY. The following
data are available:

Accounts Receivable, general ledger balance P 848,000

Allowance for bad debts:

Beginning balance P 20,000
Provision per general ledger 48,000
Write-offs ( 16,000)
Balance, end P 52,000

Summary of Aging Schedule

The summary of the subsidiary ledger as of December 31, 2006, was totaled as follows:

Debit balances:
Under on month P 360,000
One to six months 368,000
Over six months 152,000
P 880,000

Credit balances:
Almario P 8,000 - OK; additional billing in
January 2004
Peter 14,000 – Should have been credited
To Manuel Co. - 1-6 mos.
classification.
Bituin 18,000 - Advance on a sales contract
P 40,000

The customers’ ledger is not in agreement with the accounts receivable control. The client instructs the auditor to adjust the
control to the subsidiary ledger after corrections are made.
 ALLOWANCE FOR DOUBTFUL ACCOUNTS

It is agreed that 1 percent is adequate for accounts under one month. Accounts one to six months are expected to require a
reserve of 2 percent. Accounts over six months are analyzed as follows:

Definitely bad P 48,000

Doubtful (estimated to be 50% collectible) 24,000
Apparently good, but slow (90% collectible) 80,000
Total P152,000
Questions

1. The entry to adjust the account of Almario is:

a. Accounts receivable 8,000 c. Accounts receivable 8,000
Sales 8,000 Cust. with Cr. bal. 8,000
b. Sales 8,000 d. No adjustment
Accounts receivable 8,000

2. The entry to adjust the account of Peter is:

a. Accounts receivable 14,000 c. Accounts receivable 14,000
Sales 14,000 Cust. with Cr. Bal 14,000
b. Sales 14,000 d. No adjustment
Accounts receivable 14,000

3. The entry to adjust the account of Bituin is:

a. Accounts receivable 18,000 c. Accounts receivable 18,000
Sales 18,000 Cust. with Cr. bal. 18,000
b. Sales 18,000 d. No adjustment
Accounts receivable 18,000

4. The entry to reconcile the control ledger to the subsidiary ledger is:
a. Miscellaneous loss 8,000 c. Accounts receivable 8,000
Accounts receivable 8,000 Sales 8,000
b. Accounts receivable 8,000 d. Sales 8,000
Miscellaneous gain 8,000 Accounts receivable 8,000

5. The entry to adjust the Bad Debts Expense is:

a. Bad Debts Expense 74,680 c. Bad Debts Expense 30,680
Allow. for BD 74,680 Allow. for BD 30,680
b. Bad Debts Expense 26,680 d. No adjustment
Allow. for BD 26,680

6. The Accounts Receivable balance at December 31, 2006 is:

a. P 840,000 b. P 826,000 c. P 818,000 d. P 786,000
7. The Allowance for Bad Debts at December 31, 2006 is:
a. P 74,680 b. P 48,000 c. P 30,680 d. P 26,680

8. The Bad Debts Expense at December 31, 2006 is:

a. P 74,680 b. P 48,000 c. P 30,680 d. P 26,680
Problem 8
KAREN COMPANY’s accounts receivable subsidiary ledger shows the following information:
Invoice
Customer Account Balance – 12/31/06 Date Amount
Penas P 70,360 12/06/06 P 28,000
11/29/06 42,360

Jefferson 41,840 09/27/06 24,000

08/20/06 17,840

Junsay 61,200 12/08/06 40,000

10/25/06 21,200

Cherryl 90,280 11/17/06 46,280

10/09/06 44,000

Baron 63,200 12/12/06 38,400

12/02/06 24,800

Riza 34,800 09/12/06 34,800

The estimated bad debt rates below are based on Karen Company’s receivable collection experience.
Age of Accounts Rate
0 – 30 days 1%
31 – 60 days 1.5%
61 – 90 days 3%
91 – 120 days 10%
Over 120 days 50%

The allowance for bad debts account had a credit balance of P7,000 on December 31, 2006, before adjustment.

Questions

1. The adjusted Accounts Receivable balance of KAREN COMPANY at December 31, 2006 is:
a. P 317,680 b. P 319,320 c. P 326,880 d. P 361,680

2. The adjusted balance of Allowance for Bad Debts of KAREN COMPANY at December 31, 2006 is:
a. P 9,698.80 b. P 10,188.80 c. P 12,397.60 d. P 19,397.60

3. The adjusted balance of Bad Debts Expense of KAREN COMPANY at December 31, 2006 is:
a. P 9,698.80 b. P 10,188.80 c. P 12,397.60 d. P 19,397.60

4. The net realizable value of Accounts Receivable of KAREN COMPANY at December 31, 2006 is:
a. P 342,282.40 b. P 349,282.40 c. P 307,482.40 d. P 314,482.40
Problem 9
You are assigned to audit KENT COMPANY for the year ending December 31, 2006. The accounts receivable were
circularized as at December 31, 2006 and the following exceptions/replies have not been disposed of at the date of your
examination.

Customer Balance Comments Audit Findings

Duque P 30,000 Balance was paid Dec. Kent received mailed

29, 2006. January 2, 2007.

Odessa 74,000 Balance was offset by our Kent credited accounts

Dec. 10 shipment of goods. payable for P74,000 to
record purchase of goods

Solejon 16,200 The above balance has The payment was

been paid. Credited to Dairen – cust.

Rubin 23,700 We do not owe Kent any- The shipment costing

thing as the goods were
received January, 2007,
FOB Destination
P16,300 was made on
Dec. 29, 2006 and the
goods were not included
in recording the year-end
inventory.

Jamea 150,000 Our deposit of P200,000 Kent had previously

should cover this balance credited the deposit to
sales.

Ocsio 54,000 We never received these The shipment was erro-

goods. neously made to another
customer and the goods
worth P51,000 are now
on its way to Ocsio. The
shipment, FOB Shipping
Point, was made on Dec.
30, 2006.

Dela Cruz 100,000 We are rejecting the price, Kent’s clerk erroneously
which is too much computed the unit price
at P2,000. The correct
pricing should have been
at P1,200 per unit.

Ronel 18,000 Amount is okay. Since Goods cost P12,000 and

this is on consignment, we were appropriately inclu-
will remit payment upon ded in Kent’s inventory
selling the goods.
KENT COMPANY has not recorded yet its 2006 inventory. The balance of inventory and Accounts Receivable at December
31, 2006 (per trial balance) is P 456,000 and P345,900, respectively.

Questions

1. The entry to adjust the finding made in the account of Duque is:
a. Cash 30,000 c. Accounts receivable 30,000
Accounts receivable 30,000 Cash 30,000
b. Cash 30,000 d. No adjustment
Sales 30,000

2. The entry to adjust the finding made in the account of Odessa is:
a. Purchases 74,000 c. Accounts payable 74,000
Accounts receivable 74,000 Accounts receivable 74,000
b. Sales 74,000 d. No adjustment
Purchases 74,000

3. The entry to adjust the finding made in the account of Solejon is:
a. Accounts receivable 16,200 c. Accounts receivable 16,200
Accounts receivable 16,200 Accounts payable 16,200
b. Accounts payable 16,200 d. No adjustment
Accounts receivable 16,200

4. The entry to adjust the finding made in the account of Rubin is (for sales):
a. Sales 23,700 c. Accounts receivable 23,700
Accounts receivable 23,700 Sales 23,700
b. Accounts payable 23,700 d. No adjustment
Purchases 23,700

5. Entry to adjust the finding made in the account of Rubin is (for cost of sales):
a. Cost of sales 16,300 c. Retained earnings 16,300
Inventory 16,300 Inventory 16,300
b. Inventory 16,300 d. No adjustment
Cost of sales 16,300

6. The entry to adjust the finding made in the account of Jamea is:
a. Customers’ advances 150,000 c. Sales 200,000
Sale 150,000 Customers’ advances 50,000
Accounts receivable 150,000
b. Customers’ advances 150,000 d. Sales 150,000
Accounts receivable 150,000 Customers’ advances 150,000

7. The entry to adjust the finding made in the account of Ocsio is:
a. No adjustment c. Sales 54,000
Accounts receivable 54,000
b. Accounts receivable 51,000 d. Sales 3,000
Sales 51,000 Accounts receivable 3,000
8. The entry to adjust the finding made in the account of Dela Cruz is:
 a. Accounts receivable 40,000 c. Sales 60,000
Sales 40,000 Accounts receivable 60,000
b. Sales 40,000 d. No adjustment
Accounts receivable 40,000

9. The adjusted balance of Kent Company’s inventory at December 31, 2006 is:
a. 451,700 b. P 460,300 c. P 472,300 d. P 484,300

10. The adjusted balance of Kent Company’s accounts receivable at December 31, 2006 is:
a. P 37,200 b. P 55,200 c. P 187,200 d. P 205,200

Problem 10
You have been assigned to audit the financial statement MALAQUI INCORPORATED. The company is a distributor of a
variety of electronic appliances and parts. The company uses the calendar year for reporting purposes. Information regarding
balances of MALAQUI INCORPORATED’S Accounts Receivable and the related Allowance for Doubtful Accounts as of
December 31, 2006 and the related audit finding, is given below.

The schedule of accounts receivable furnished you by the accountant reflects some errors. The total figure in the schedule
does not tally with the balance per subsidiary ledger of P919,000. Based on your review of sales invoices, purchase orders
and other related documents, you noted the following information:

1. Sales on account of various electronics totaling P36,480 were returned by the customer on December 28, 2006, but no
entry was made in the books. The goods were included in the year-end physical count.

2. Based on the findings per confirmation reply from a customer, he indicated that he has already paid his account of P23,980
in October, 2006. Your verification disclosed that said collection was credited to net sales account.

3. Collection of P12,950 on November 5, 2006 from Diana Corporation was credited to the account of DNA Corporation.

The allowance for doubtful accounts is set at 3% of the outstanding accounts receivable at the end of the period. As of
December 31, 2006, the Allowance for Doubtful Accounts has a balance of P32,400 before adjustment.

Questions

1. What is the adjusted balance of Accounts Receivable as of December 31, 2006?

a. P 919,000 b. P 895,020 c. P 882,520 d. P 858,540

2. What is the adjusted balance of Allowance for Doubtful Accounts as of December 31, 2006?
a. P 27,570.00 b. P 26,850.60 c. P 26,475.60 d. P 25,756.20

Problem 11
On September 1, DY COMPANY assigns specific receivables totaling P750,000 to Davao Bank as collateral on a P625,000,
12% note. DY COMPANY will continue to collect the assigned accounts receivable. Davao Bank also assesses a 2% service
charge on the total accounts receivable assigned. DY COMPANY is to make monthly payments to Davao Bank with cash
collected on assigned accounts receivable. Collections of assigned accounts during September totaled P260,000 less cash
discounts of P3,500.
Questions

1. What were the proceeds from the assignment of DY COMPANYs’ accounts receivable on September 1?
a. P 610,000 b. P 612,500 c. P 625,000 d. P 735,000

2. What amount is owed to Davao Bank by DY COMPANY for September collections plus accrued interest on the note to
September 30?
a. P 260,000 b. P 262,750 c. P 264,000 d. P 266,250

Problem 12
On April 1, 2006, VAILOCES CORPORATION assigned accounts receivable totaling P400,000 as collateral on a P300,000,
16% note from Racel Bank. The assignment was done on a nonnotification basis. In addition to the interest on the note, the
bank also receives a 2% service fee, deducted in advance on the P300,000 value of the note.

Additional information is as follows:

1. Collections of assigned accounts in April totaled P191,100, net of a 2% sales discount.

2. On May 1, VAILOCES CORPORATION paid the bank the amount owed for April collections plus accrued interest on note
to May 1.

3. The remaining accounts were collected by VAILOCES CORPORATION during May except for P2,000 accounts written-
off as worthless.

4. On June 1, VAILOCES CORPORATION paid the bank the remaining balance of the note plus accrued interest.

Questions

1. The journal entry of VAILOCES CORPORATION in the assignment of accounts receivable on April 1, 2006 is:
a. Cash 294,000 c. Cash 294,000
Finance charges 6,000 Finance charges 6,000
Accounts receivable 300,000 Notes payable 300,000
b. Cash 294,000 d. Cash 294,000
Finance charges 6,000 Commission exp. 6,000
AR – assigned 300,000 AR – assigned 300,000

2. The journal entry of VAILOCES CORPORATION in the assignment of accounts receivable on April 1, 2006 assuming the
assignment is on notification basis:
a. Cash 294,000 c. Cash 294,000
Finance charges 6,000 Finance charges 6,000
Accounts receivable 300,000 Notes payable 300,000
b. Cash 294,000 d. Cash 294,000
Finance charges 6,000 Commission exp. 6,000
AR – assigned 300,000 AR – assigned 300,000
3. The entry of VAILOCES CORPORATION on April collection of the assigned account is:
a. Cash 191,100 c. Cash 191,100
Sales discounts 3,900 Sales discounts 3,900
AR – assigned 195,000 Accounts receivable 195,000
b. Cash 191,100 d No journal entry
Accounts receivable 191,100

4. If the assignment is on notification basis, who should collect the assigned accounts receivable?
a. Vailoces Corporation c. A third party
b. Racel Bank d. It is the option of the customer to
whom he/she will pay the account

5. Using the assumption in number 4 above, what will be the entry of VAILOCES CORPORATION on the April collection of
the assigned accounts receivable?
a. Cash 191,100 c. Cash 191,100
Sales discounts 3,900 Sales discounts 3,900
AR – assigned 195,000 Accounts receivable 195,000
b. Cash 191,100 d No journal entry
Accounts receivable 191,100

6. The journal entry of VAILOCES CORPORATION on the on May 1, 2006 is:

a. Notes payable 187,100 c. Notes payable 188,500
Interest expense 4,000 Interest expense 2,600
Cash 191,100 Cash 191,100
b. Notes payable 195,000 d. Notes payable 195,000
Interest expense 5,333 Interest expense 4,000
Cash 200,333 Cash 199,000

7. Using the same information in number 6 (May 1 transaction) except that the assignment is done on a notification basis,
the entry should be:
a. Notes payable 187,100 c. Notes payable 188,500
Interest expense 4,000 Interest expense 2,600
Accounts receivable 191,100 AR –assigned 191,100
b. Notes payable 195,000 d. No journal entry
Interest expense 4,000
AR - assigned 199,000

8. The total interest expense of VAILOCES CORPORATION on the assigned accounts receivable is:
a. P 5,400 b. P 8,066 d. P 10,000 c. P 11,400

Problem 13
UY FINANCE CORPORATION purchases the accounts receivable of other companies on a without recourse, notification
basis. At the time the receivables are factored, 15% of the amount factored is charged to the client as commission and
recognized as revenue in UY’S books. Also, 10% of the receivables factored is withheld by Uy as protection against sales
returns or other adjustments. This amount credited by Uy to the client Retainer account. At the end of each month, payments
are made by Uy to its clients so that the balance in the Client Retainer account is equal to 10% of unpaid factored receivables.
Based on Uy’s bad debt loss experience, an allowance for bad debts of 5% of all factored receivables is to be established,
Uy makes adjusting entries at the end of each month.

On January 3, 2003, Jannette Company factored its accounts receivable totaling P1,000,000. By January 31, P800,000 on
these receivables had been collected by Uy.

Questions

1. The commission earned of Uy Finance Corporation from Jannette Company’s accounts receivable factored is:
a. P 150,000 b. P 120,000 c. P 135,000 d. P 90,000

2. The proceeds received by Jannette Company on the accounts factored is:

a. P 810,000 b. P 780,000 c. P 765,000 d. P 750,000

3. How much is the Client Retainer account of Uy Finance Corporation at January 31, 2003 is:
a. P 0 b. P 20,000 c. P 60,000 d. P 80,000

4. How much is the bad debts expense of Uy Finance Corporation at January 31, 2003 is:
a. P 50,000 b. P 40,000 c. P 20,000 d. P 0

Problem 14
During your audit of the LEILANI COMPANY for the calendar year 2006, you find the following accounts:
NOTES RECEIVABLE
Sept. 1 Samson, 12%, due in 3 mos. 36,000 36,000
Nov. 1 Hazel, 15%, due in 6 mos. 90,000 126,000
Nov. 1 Salazar, no interest, due in one
year 75,000 201,000
Nov. 30 Rosa, Co. 12%, due in 13 mos. 15,000 216,000
Dec. 1 Rona, 15%, due in 15 mos. 36,000 252,000
Dec. 2 Anito, President, 18%, due in 3
mos. 18,000 270,000

NOTES RECEIVABLE DISCOUNTED

Sept. 1 Samson note, discounted at 36,000 15% 36,000

Nov. 1 Salazar note, discounted at 75,000 111,000

15%

INTEREST EXPENSE
Sept. 1 Samson note 310.50 310.50
Nov. 1 Salazar note 11,250.00 11,560.50

All notes are trade notes receivable unless otherwise specified. The Samson note was paid December31, 2006. Interest
income is credited only upon receipt of cash.
Questions

1. The accrued interest income at December 31, 2006 is:

a. P 2,748 b. P 3,018 c. P 3,120 d. P 4,200

2. The interest expense at December 31, 2006 is:

a. P 1,875.00 b. P 2,185.50 c. P 4,060.50 d. P 11,560.50

3. The Notes Receivable at December 31, 2006 is:

a. P 141,000 b. P 159,000 c. P 216,000 d. P 252,000

4. The Notes Receivable – discounted at December 31, 2006 is:

a. P 63,750 b. P 73,125 c. P 75,000 d. P 111,000

5. How much is the proceeds in the discounting of notes receivable for the year?
a. P 99,439.50 b. P 100,060.50 c. P 111,000.00 d. P 111,310.50

Problem 15
On January 1, 2006, TUQUIB COMPANY sells its equipment with a carrying value of P160,000. The company receives a
non-interest-bearing note due in 3 years with a face amount of P200,000. There is no established market value for the
equipment. The prevailing interest rate for a note of this type is 12%. The following are the present value factors of 1 at 12%:

Present value of 1 for 3 periods 0.71178

Present value of an ordinary annuity of 1 for 3 periods 2.40183

Questions

1. The gain or loss on the sale of equipment is:

a. P 40,000 b. P 122 c. P 0 d. (P 17,644)

2. The discount on notes receivable is:

a. P 57,644 b. P 40,000 c. P 39,878 d. P 0

3. The entry to record the sale of equipment is:

a. Notes receivable 200,000 c. Notes receivable 200,000
Equipment 200,000 Loss on sale 17,644
Equipment 160,000
Discount on NR 57,644
b. Notes receivable 200,000 d. Notes receivable 200,000
Equipment 160,000 Equipment 160,000
Gain on sale 40,000 Gain on sale 122
Discount on NR 39,878

4. The discount amortization at the end of the second year using the effective-interest amortization is:
a. P 17,083 b. P 19,133 c. P 21,428 d. P 36,216

5. The entry to record the discount amortization is:

 a. Discount on NR c. Interest income
Interest income Discount on NR
b. Discount on NR d. Interest expense
Interest expense Discount on NR

Problem 16
On January 2, 2006, a tract of land that originally cost P800,000 was sold by MAYLENE CORPORATION. The
company received a P1,200,000 note as payment. It bears interest rate of 4% and is payable in 3 annual installments of
P400,000 plus interest on the outstanding balance. The prevailing rate of interest for a note of this type is 10%. The present
value table shows the following present value factors of 1 at 10%:

Present value factor of 1 for 3 periods 0.75132

Present value factor of 1 for 2 periods 0.82645
Present value factor of 1 for 1 period 0.90909
Present value of an ordinary annuity of 1 for 3 periods 2.48685

Questions

1. The gain on sale of land on January 2, 2006 is:

a. P 194,740 b. P 276,847 c. P 290,740 d. P 400,000

2. The interest income on the note receivable for the year ended December 31, 2006 using effective interest method is:
a. P 120,000 b. P 109,074 c. P 107,685 d. P 99,474

3. How much cash will MYLENE CORPORATION received from notes receivable?
a. P 1,076,847 b. P 1,200,000 c. P 1,296,000 d. P 1,476,847

Problem 17
The balance sheet of PERSEVERANCE CORPORATION on December 31, 2005, includes the following cash and receivable
balances:

Cash – Davao Bank P 45,000

Currency and coins 16,000
Petty cash fund 1,000
Cash in bond sinking fund 15,000
Notes receivable (including discounted with
recourse, P15,500) 36,500
Accounts receivable P 85,600
Less: Allow. for bad debts (4,150) 81,450
Interest receivable 525

Current liability reported in the December 31, 2005, balance sheet included:

Obligation on discounted notes receivable 15,500

Transactions during 2006 included the following:

1. Sales on account were P767,000.

2. Cash collected on accounts totaled P576,500, including accounts of P93,000 with cash discounts of 2%.

3. Notes received in settlement of accounts totaled P82,500.

4. Notes receivable discounted as of December 31, 2005, were paid at maturity with the exception of one P3,000 note on
which the company had to pay the bank P3,090, that included interest and protest fees. It is expected that recovery will
be made on this note early in 2004.

5. Customer notes of P60,000 were discounted with recourse during the year, proceeds from their transfer being P58,500.
Of this total, P48,000 matured during the year without notice of protest.

6. Customer accounts of P8,720 were written-off in prior year as worthless.

7. Recoveries of doubtful accounts written-off in prior years were P2,020. (not included in the collection in number 2)
8. Notes receivable collected during the year totaled P27,000 and interest collected was P2,450.

9. On December 31, accrued interest on notes receivable was P630.

10. Uncollectible accounts are estimated to be 5% of the December 31, 2006, accounts receivable balance.

11. Cash of P35,000 was borrowed from Davao Bank, accounts receivable of P50,000 being pledged on the loan. Collections
of P19,500 had been made on these receivables included in the total given in transaction (2) and this amount was applied
on December 31, 2006, to payment of accrued interest on the loan of P600, and the balance to partial payment of the
loan.

12. Petty cash fund was reimbursed based on the following analysis of expenditure vouchers:
Travel expenses P 112
Entertainment expenses 78
Postage 93
Office supplies 173
Cash over 6

13. P3,000 cash was added to the bond sinking fund.

14. Currency on hand at December 31, 2006 was P12,000.

15. Total cash payment for all expenses during the year were P468,000. Charge to General Expense

Based on the information above and some other analysis, answer the following questions:

Questions

1. PERSEVERANCE CORPORATION’s Cash balance at December 31, 2006 is:

a. P 269,430 b. P 265,430 c. P 252,430 d. P 219,930
2. PERSEVERANCE CORPORATION’s Accounts Receivable balance at December 31, 2006 is:
a. P178,8787.00 b. P 178,824.50 c. P176,804.50 d. P174,254.50

3. PERSEVERANCE CORPORATION’s Other Cash Item (Currency and coins & Petty Cash Fund) at December 31, 2006
is:
a. P 16,000 b. P 13,000 c. P 12,550 d. P 12,000

4. PERSEVERANCE CORPORATION’s Notes Receivable at December 31, 2006 is:

a. P 46,500 b. P 31,000 c. P 30,910 d. P 28,500

5. PERSEVERANCE CORPORATION’s Obligation of Discounted of Note Receivable at December 31, 2006 is:
a. P 15,500 b. P 12,000 c. P 11,910 d. P 3,500

6. PERSEVERANCE CORPORATION’s Interest Receivable at December 31, 2006 is:

a. P 2,555 b. P 1,155 c. P 630 d. P 525

7. PERSEVERANCE CORPORATION’s Bad debts at December 31, 2006 is:

a. P 16,005.20 b. P 13,875.50 c. P 11,855.50 d. P 11,825.50

8. PERSEVERANCE CORPORATION’s Allowance for bad debts at December 31, 2006 is:
a. P 9,406.50 b. P 9,305.50 c. P 9,252.00 d. P 4,150.00

9. PERSEVERANCE CORPORATION’s Sales balance at December 31, 2006 is:

a. P 767,000 b. P 765,140 c. P 765,102 d. P 757,330

10. PERSEVERANCE CORPORATION’s Interest income balance at December 31, 2006 is:
a. P 3,086 b. P 3,080 c. P 2,561 d. P 2,555

Problem 18
You are engaged in your fifth annual examination of the financial statements of NAVAL CORPORATION. Your examination
is for the year ended December 31, 2006. The client prepared the following schedule of Trade Notes Receivable and Interest
Receivable for you at December 31, 2006. You have agreed the opening balances to your prior year’s audit workpapers.

NAVAL CORPORATION
TRADE NOTES RECEIVABLE AND RELATED INTEREST RECEIVABLE Trade-Notes
Receivable
Maker Date Terms Int. Bal. 2006 debits 2006 Bal.
Rate 12/31/05 credit 12/31/06
Rubin Co. 04/01/05 1-year 12% P 60,000 P 60,000

Cardoza 05/01/06 90 days after - P 30,000 29,375 P 625

date
Pancho 07/01/06 60 days after 12% 6,000 6,000
date
Betque 08/03/06 Demand 12% 15,000 15,000
Gabuter o 10/02/06 60 days after 12% 50,000 50,000 -
date
Noval 11/01/06 90 days after 8% 42,000 35,000 7,000
date
Gan 11/01/06 90 days 12% 32,000 after 32,000
date

INTEREST RECEIVABLE
Due from Balance 2006 debit 2006 credit Balance
12/31/06
Rubin Co. P 5,400 P 1,800 P 7,200
Pancho 120 P 120
Betque 400 400
Gabutero 1,000 660 340
Noval 560 560
Gan ___________ 640 ___________ 640
Totals P 5,400 P 4,520 P 7,860 P 2,060

Your examination reveals this information:

1. Interest is computed on a 360-day basis. In computing interest, it is the corporation’s practice to exclude the first day of
the note’s term and to include the due date.

2. The Cardoza’s 90-day non-interest bearing note was discounted on May 15 at 10%, and the proceeds were credited to
the Trade Notes Receivable account. The note was paid at maturity.

3. Pancho became bankrupt on August 31, and the corporation will recover 75 cents on the peso. All of Naval Corporation’s
notes receivable provide for interest at a rate of 12% on the maturity value of a dishonored note.

4. Betque, president of Naval Corporation, confirmed that she owed Naval Corporation P15,000 and that she expected to
pay the note within six months. You are satisfied that the note is collectible.

5. Gabutero’s 60-day note was discounted on November 1 at 8%, and the proceeds were credited to the Trade Notes
Receivable and Interest Receivable accounts. On December 2, Naval Corporation received notice from the bank that
GAbutero’s note was not paid at maturity and that it had been charged against Naval’s checking account by the bank.
Upon receiving the notice from the bank, the bookkeeper recorded the note and the accrued interest in the Trade Notes
Receivable and Interest Receivable account. Gabutero paid Naval Corporation the full amount due in January 2003.

6. Noval, 90-day note was pledged as collateral for P35,000, 60-day 10% loan from the Davao National Bank on December
1.

7. On November 1, the corporation received four, P8,000, 90-day notes from Gan. On December 1, the corporation received
payment from Gan for one of the P8,000 notes with accrued interest. Prepayment of the notes is allowed without penalty.
The bookkeeper credited the Gan’s Accounts Receivable account for the cash received.
Questions

1. At December 31, 2006, the note receivable from Cardoza has a balance of:
a. P 30,000 b. P 29,375 c. P 625 d. P 0

2. The interest income from Cardoza’s note at December 31, 2006 is:
a. P 750 b. P 625 c. P 500 d. P 0

3. At December 31, 2006, the note receivable from Pancho has a balance of:
a. P 6,370.92 b. P 6,366.00 c. P 6,120 d. P 0

4. The interest income from Pancho’s note at December 31, 2006 is:
a. P 370.92 b. P 250.92 c. P 246 d. P 0

5. At December 31, 2006, the note receivable from Betque has a balance of:
a. P 15,350 b. P 15,000 c. P 14,650 d. P 0

6. At December 31, 2006 the note receivable from Gabutero has a balance of:
a. P 150,000 b. P 100,000 c. P 50,000 d. P 0

7. At December 31, 2006 the note receivable from Noval has a balance of:
a. P 42,000 b. P 35,000 c. P 7,000 d. P 0

8. At December 31, 2006 the note receivable from Gan has a balance of:
a. P 32,480 b. P 32,000 c. P 24,000 d. P 23,950

9. The total Note Receivable – Trade at December 31, 2006 is:

a. P 89,000 b. P 81,000 c. P 72,366 d. P 66,000

10. The total Interest Receivable at December 31, 2006 is:

a. P 2,300 b. P 2,060 c. P 1,950 d. P 1,790

Problem 19
In the audit of BEATLES COMPANY, the auditor had an appreciation of the following schedule and noted some comments
for possible adjustments:
Beatles Company
Accounts Receivable Schedule
December 31, 2015

Customer Balance Current Past Due

Love M. Do P92,000 P - P92,000
Strawberry Fields 420,000 248,000 172,000
This Boy Company 350,00 92,000 258,000
Girl Corporation 374,000 212,000 162,000
Ticket To Ride 'Transport 160,000 - 160,000
Corp. Let It Be Corp. 124,000 60,000 64,000
Hex' Jude 4,000 . 4,000
Get Back Company 256,000 80,000 176,000
Yesterday Corp. 240,000 240,900 -
Totals P2,020,000 P936,000 Pl,084. 000

The Accounts Receivable control account balance was determined to be

P2,020,000.

The external auditor submitted the following audit comments for possible adjustments:
Love M. Do Merchandise found defective; returned by customer on October 31, 2015 for credit,
but the credit memo was issued by Beatles only on January 15, 2016.

Strawberry Fields Account is good but usually pays late.

This Boy Company Merchandise worth P160,000. was destroyed while in transit on May 31, 2015,
terms FOB Destination. The carrier was billed on June 15, 2015. (See Ticket To
Ride Corp. and Yesterday Corp.)

Girl Corporation Customer billed twice in error for P40,000. Balance is collectible.

Ticket To Ride Collected in full on January 31, Corp. 2016

Let It Be Corp. Paid in full on December 30, 2015 but not recorded. Collections were deposited on January
2, 2016.

Hey Jude Received account confirmation from customer for P44,000. Investigation revealed an
erroneous credit for P40,000. (See Get Back Company)

Get Back Company Neglected to post P40,000 credit to customer's account.

Yesterday Corp. Customer wants to know reason for receipt of P160,00() credit memo as their accounts
payable balance was P400,000.

REQUIRED:
1. Adjusting entries as of December 31, 2015.
2. Adjusted balance of Accounts Receivable - Trade as of December 31, 2015.

Problem 20
The POSTER CO. sells direct to retail customers and also to wholesalers. Accounts receivable and an allowance for had
debts are maintained separately for each division. On January 1, 2015 the balance of the retail accounts receivable was
P209,000 while the bad debts with respect to retail customers was a credit of P7,600.

The following summary pertains only to retail sales since 2012:

Credit Sales Bad Debts Bad Debts.
Written off Recoveries
2012 P1,110,000 P26,000 P2,150
2013 1,225,000 29,500 3,750
2014 1,465,000 30,000 3,600
2015 1,500,000 31,000 4,200
Bad debts are provided for as a percentage GI credit sales. The accountant calculates the percentage annually by using the
experience of the three years prior to the current year. The formula is bad debts written off less recoveries expressed as a
percentage of the credit sales for the same period. Cash receipts in 2015 from credit sales to retail customers was P1,380,200.

REQUIRED: Determine the following:

1. Adjusted accounts receivable as of December 31, 2015
2. Adjusted allowance for doubtful accounts as of December 31, 2015

Problem 21
In connection with your examination of the financial statements of RINGO INC. for the year ended December 31, 2015, you
were able to obtain certain information during your audit of the accounts receivable and related accounts.

• The December 31, 2015 balance in the Accounts Receivable control accounts is P837,900.

• An aging schedule of the accounts receivable as of December 31, 2015 is presented below:
Net debit Percentage to be applied after
Aging Balance correction have been made
60 days & under P387,800 1 percent
61 to 90 days 307,100 2 percent
91 to 120 days 89,800 5 percent
Over 120 days 53,200 Definitely uncollectible, P9,000; k
the remainder is estimated to be
P837,900 25% uncollectible.

• The Allowance for Doubtful Accounts schedule is presented below:

Debit Credit Balance

January 1, 2015 P19,700
November 30, 2015 P6,100 13,600
December 31, 2015 (P837,900 x 5%) P41,895 P55,495

• Entries made to Doubtful Accounts Expense account were:

1 A debit on December 31 for the amount of the credit to the Allowance for Doubtful Accounts.

2. A credit Or P6,100 on November 30, 2015, and a debit to Allowance for Doubtful Accounts because of a bankruptcy. The
related sales took place on October 1, 2015.

• There is a credit balance in one account receivable (61 to 90 days) of P11,000; it represents an advance on a sales contract.

REQUIRED:
1. Determine the following as of and for the year ended December 31, 2015:
a. Accounts receivable
b. Allowance for doubtful account
c. Doubtful accounts expense
2. Adjusting entries as of December 31, 2015
Problem 22
BAHRAIN BANK granted a loan to a borrower in the amount of P10, 000,000 on January 1, 2014. The interest rate on the
loan is 10% payable annually starting December 31, 2014. The loan matures in five years on December 31, 2018. Bahrain
Bank incurs P130,900 of direct loan origination cost and P50,000 of indirect loan origination cost. In addition, Bahrain Bank
charges the borrower a 5-point nonrefundable loan origination fee.

The borrower paid the interest due on December 31, 2014. However, during 2015 the borrower began to experience financial
difficulties, requiring the bank to reassess the collectability of the loan. As of December 31, 2015, the bank expects that only
P8,000,000 of the principal will be recovered. The P8,000,000 principal amount is expected to be collected in two equal
installments on 'December 31, 2017 and December 31, 2019. The prevailing interest rates for similar type of note as of
December 31, 2014 and 2015 are 15% and 16%, respectively.

REQUIRED: Determine the following:

1. Interest income to be recognized in 2014
2. Carrying amount of the loan as of December 31, 2014
3. Loan impairment loss to be recognized in 2013 •
SOLUTION #1

(1) Claims Receivable 22,500

Accounts receivable 22,500
(2) Sales 30,000
Accounts receivable 30,000
(3) Advances to affiliates 150,000
Accounts receivable 150,000
(4) Receivables - officers/employee 13,500
Accounts receivable 13,500
(5) Deposits for contracts bidding 67,500
Accounts receivable 67,500
(6) Subscription receivable 60,000
Accounts receivable 60,000
(7) Advances to suppliers 24,000
Accounts receivable 24,000
(8) Advances to officers/employee 4,500
Accounts receivable 4,500
(9) Accounts receivable 30,000
Allowance for bad debts 30,000
(10) Accounts receivable 6,000
Customers with credit balance 6,000
(11)
OE: Cash 237,000
Notes payable 237,000
CE: Cash 237,000
Commission expense 3,000
Notes payable 300,000
Adj: Commission expense 3,000
Notes payable 3,000

Unadjusted AR 1,467,000 Non-trade AR

(1) ( 22,500) Claims receivable 22,500
(2) ( 30,000) Advances to affiliates 150,000
(3) ( 150,000) Advances to off/empl
(4) ( 13,500) ( 13,500 + 4,500) 18,000
(5) ( 67,500) Deposit for contracts 67,500
(6) ( 60,000) Subscription receivable 60,000
(7) ( 24,000) Advances to suppliers 24,000
(8) ( 4,500)
(9) 30,000
(10) 6,000 __________
Adjusted balance 1,131,000 Total 342,000
Current non-trade AR
Claims receivable 22,500
Advances to off/empl
(13,500 + 4,500) 18,000
Advances to suppliers 24,000
Total 64,500
Answer:

1. D 2. A 3. B 4. A

Solution #2

Accounts Receivable 80,000

Customers’ credit balance 80,000
Allowance for bad debts 50,000
Accounts receivable 50,000
Bad debts expense 40,000
Allowance for bad debts 40,000
Computation:
Provision per records 315,000
* Provision per audit
Adjustment

* Beg. balance 95,000

+ Provisions 355,000 squeezed
- Write-off per book (100,000)
- Additional write-off (50,000)
Ending balance 300,000
Answer:
1. C 2. B 3. D 4. C

Solution #3
Accounts Receivable
Credit Sales 720,736.80 Collection 294,000.00 Recoveries
6,505.20 Sales discount
from credit cust. 6,000.00
Write-off 19,200.00
Sales returns from
credit customer 10,080.00
__________ Recoveries 6,505.20
727,242.00 335,785.20
Ending bal. 391,456.80
Net credit sales:
Credit sales 720,736.80
- Sales discounts from credit sales (6,000.00)
- Sales returns from credit sales (10,080.00)
Net credit sales 704,656.80

Bad debts:
Net credit sales 704,656.80
x % of uncollectible 2%
 Bad debts 14,093.136

Allowance for bad debts:

Beg. balance 19,327.20
Provision for bad debts 14,093.14
Recoveries 6,505.20
Less: Write-off ( 19,200.00)
Allowance ending balance 20,725.54
Answer:
1. A 2. B 3. C 4. B 5. D 6. A

Solution #4
(1) A 1,300,000 + 50,000 + 5,000 P1,355,000

(2) C P1,355,000 x 1 ½% P20,325

(3) C P20,325 + P8,000 debit balance P28,325

Solution #5

Computation for unadjusted AR beginning balance:

Accounts Receivable
Beg. bal. 50,400 Collections 470,400
Sales 780,000 Allow. for BD 90,000
830,400 560,400
End bal. 270,000 squeezed figure

Ending balance of AR control account 270,000

Add: Credits during December 560,400
Less: Debits during December ( 780,000)
Balance of AR control account – Dec. 1 50,400
Add: 2006 Est. allowance for BD 18,000

Adjusted AR control account – Dec. 1 68,400

Less: AR subsidiary account – Dec. 1 177,000
Credit balance of AR account – Dec. 1 108,600

Answer:
1. A 2. B 3. C 4. D
Solution #6

Per PER SUBSIDIARY LEDGERS

Control Over
Acct. 0-1 mo. 1-3 mos 3-6 mos. 6 mos. Total
Bal. before adjustments P 197,000 P 93,240 P 76,820 P 22,180 P 6,000 P 198,240
Adjustments:
Add(Deduct)
(2) Correction to 10.31.02
entry to write-off uncollectible accts. (200)
(3) Write-off of acct. considered definitely uncollectible
( 1,000) (1,000) (1,000)
(4) Reclassification of credit balances
2,500 2,000 500 2,500 P 198,300 P 95,240
P 77,320 P 22,180 P 5,000 P 199,740
(5) To adjust the control acct. to agree with SL 1,440
Adjusted balance P 199,740

Audit adjustments as of 12.31.06

(1) Bad Debts expense 324

Allowance for doubtful accounts 324

(2) Allowance for doubtful accounts 200

Accounts Receivable 200

(3) Allowance for doubtful accounts 1,000

Accounts Receivable 1,000

(4) Accounts Receivable 2,500

Customer’s Accounts with Credit Balances 2,500

(5) Accounts Receivable 1,440

Miscellaneous Revenue 1,440
(6) Allowance for Doubtful Accounts 6,359.80
Bad Debts Expense 6,359.8
Required allowance on 12.31.06
0-1 mo. P 95,240 x 1% P 952.40
1-3 mos. 77,320 x 2 % 1,546.40
3-6 mos. 22,180 x 3% 665.40
Over 6 mos. 3,000 x 20% 600.00
2,000 x 50% 1,000.00
P 4,764.20
Beg. balance 3,658.00
 + Provision per audit 3,490.20
(squeezed figure)
- Write-off 2,384.00
Ending balance 4,764.20
Provision per book 9,850.00
Provision per audit 3,490.20
Adjustment 6,359.8
Answer:
1. A 2. C 3. D 4. A 5. C
6. A 7. C 8. A

Solution #7

* (1) Accounts receivable 8,000

Sales 8,000

(2) Accounts receivable 14,000

Accounts receivable 14,000

* (3) Accounts receivable 18,000

Customers’ deposit 18,000

(4) Allowance for bad debts 48,000

Accounts receivable 48,000

* (5) Miscellaneous losses 8,000

Accounts receivable 8,000
To reconcile control account with subsidiary ledger.

(6) Bad debts 26,680

Allowance for bad debts 26,680

* ignored in the aging of AR

Aging of AR
Control Under 1 to 6 Over 6
Account 1 mo. mos. mos.
Unadjusted balance 848,000 360,000 368,000 152,000
(1) 8,000
(2) - (14,000)
(3) 18,000
(4) (48,000) (48,000)
(5) ( 8,000) ______ _______ _______
Adjusted balance 818,000 360,000 354,000 104,000

Under 1 mo. 360,000 x 1% = 3,600

1 to 6 mos. 354,000 x 2% = 7,080 Over 6 mos.
24,000 x 50% = 12,000
80,000 x 10% = 8,000
Required allowance for bad debts 30,680

Provision for bad debts per audit:

Beginning balance 20,000
+ Provision – squeezed figure 74,680
- Write-off per book 16,000
- Additional Write-off 48,000
Ending balance 30,680

Provision per book 48,000

Provision per audit 74,680
Adjustment 26,680

Answer:
1. A 2. D 3. C 4. A 5. B
6. C 7. C 8. A

Solution #8

Aging of AR
Balance 0-30 31-60 61-90 91-120 Over 120
12/31/06 Days Days Days Days Days

Penas P 70,360 28,000 42,360

Jefferson 41,840 24,000 17,840
Junsay 61,200 40,000 21,200
Cherryl 90,280 46,280 44,000
Baron 63,200 63,200
Riza 34,800 ______ ______ ______ 34,800 _____
Total P361,680 131,200 88,640 65,200 58,800 17,840
x % of uncollectibility 1% 1.5% 3% 10% 50%

Required Allowance 1,312 1,329.60 1,956 5,880 8,920 = P 19,397.60

Bad debts expense 12,397.60

Allowance for bad debts 12,397.60
(P19,397.60 – P7,000)
Answer:
1. D 2. D 3. C 4. A
Solution #9

For Doque No adjustment

For Odessa Accounts payable 74,000
Accounts receivable 74,000
For Solejon Accounts receivable 16,200
Accounts receivable 16,200
For Rubin Sales 23,700
Accounts receivable 23,700
Inventory 16,300
Cost of sales 16,300
For Jamea Sales 200,000 Customers’
advances 50,000
Accounts receivable 150,000
For Ocsio. Sales 3,000
Accounts receivable 3,000
For dela Cruz Sales 40,000
Accounts receivable 40,000
For Ronel Sales 18,000
Accounts receivable 18,000

Unadjusted Inventory 456,000 Unadjusted AR 345,900

Adjustment - Rubin 16,300 Adjustment - Odessa ( 74,000)
- Solejon -
- Rubin ( 23,700)
- Jamea (150,000)
- Ocsio ( 3,000)
- dela Cruz ( 40,000)
_________ - Ronel ( 18,000)
Adjusted balance 472,300 Adjusted balance 37,200

Answer:
1. D 2. C 3. A 4. A 5. B
6. C 7. D 8. B 9. C 10. A

Solution #10

Sales 36,480
Accounts receivable 36,480
Sales 23,980
Accountsreceivable 23,980
Answer:

1. D 2. D
Solution #11
(1) A P625,000 – (2% x P750,000) P610,000

(2) B P260,000 – P3,500 + (P625,000 x 12% x 1/12) P262,750

Solution #12

April 1 Accounts receivable – assigned 400,000

Accounts receivable 400,000
1 Cash 294,000
Finance charges (300,000 x 2%) 6,000
Notes payable 300,000
(1) Cash 191,100
Sales discounts 3,900
AR – assigned (191,100/98%) 195,000
(2) Notes payable 195,000 Interest expense 4,000
(300,000 x 16% x 1/12)
Cash 199,000
(3) Cash 203,000
Allowance for bad debts 2,000
AR – assigned 205,000
(400,000 – 195,000)
(4) Notes payable (300,000 – 195,000)105,000
Interest expense 1,400
(105,000 x 16% x 1/12)
Cash 106,400
Answer:
1. C 2. C 3. A 4. B 5. D
6. D 7. B 8. A

Solution #13

UY FINANCE CORPORATION’S BOOKS

Jan. 3 Accounts receivable factored 1,000,000

Commission income (P1 M x 15%) 150,000
Client Retainer (P1 M x 10%) 100,000
Cash 750,000
31 Cash 800,000
Accounts receivable factored 800,000
31 Client Retainer 80,000
Cash (100,000 – [10% x 200,000]) 80,000
31 Bad debts expense 50,000
Allowance for bad debts (P1 M x 5%) 50,000
JANETTEE COMPANY’S BOOKS

Jan. 3 Cash 750,000

Receivable from factor 100,000
Commission 150,000
Accounts receivable 1,000,000
31 Cash 80,000
Receivable from factor 80,000

Answer:
1. A 2. D 3. B 4. A

Solution #14
1. C
Hazel 90,000 x 15% x 2/12 = P 2,250
Rosa 15,000 x 12% x 1/12 = 150
Rona 36,000 x 15% x 1/12 = 450
Anito 18,000 x 18% x 1/12 = 270
Total accrued interest P 3,120
2. B
Samson = P 310.50
Salazar 11,250 x 2/12 = 1,875.00
Total interest expense = P2,185.50
3. A
Hazel 90,000
Rosa 15,000
Rona 36,000
141,000
Total
4. C
Salazar 75,000
5. A
Samson P 36,000 – P 310.50 = P 35,689.50
Salazar P 75,000 – P11,250 = 63,750.00
Total proceeds = P 99,439.50

Solution #15

1. D
Sales price – present value of note (P200,000 x 0.71178) 142,356
Book value of equipment 160,000
Loss on sale of equipment (17,644)

2. A
Face value of note 200,000
Present value of note 142,356

Discount on notes receivable 57,644

3. C
Notes receivable 200,000
Loss on sale of equipment 17,644
Equipment 160,000
Discount on notes receivable 57,644
4. B
Present value of note, 1/1/03 142,356
Add: Interest earned in 2003
(142,356 x 12%) 17,083
Present value of note, 1/1/04 159,439
Add: interest earned in 2004
(159,439 x 12%) 19,133
Present value of note, 1/1/05 178,572
5. A

Solution #16
Amount of cash to be received:

Interest Principal Total

2003 48,000 * 400,000 448,000
2004 32,000 ** 400,000 432,000
2005 16,000 *** 400,000 416,000
Total 1,296,000
* 1,200,000 x 4%
** 800,000 x 4%
*** 400,000 x 4%

Cash received PV Factor Present Value

2003 448,000 0.90909 407,272
2004 432,000 0.82645 357,026
2005 416,000 0.75132 312,549
Total 1,076,847
Present value of note 1,076,847
Cost of land 800,000
Gain on sale 276,847

Interest income for 2006 – P1,076,847 x 10% = P107,685

Answer:

1. B 2. C 3. C
Solution #17
(1) Accounts receivable 767,000
Sales 767,000
(2) Cash 576,500
Sales discounts 1,860
Accounts receivable 576,360
(3) Notes receivable 82,500
Accounts receivable 82,500
(4) Obligation on discounted note 12,500
Notes receivable 12,500
Accounts receivable 3,090
Cash 3,090
Obligation on discounted note 3,000
Notes receivable 3,000
(5) Cash 58,500
Interest expense 1,500
Obligation on discounted note 60,000
Obligation on discounted note 48,000
Notes receivable 48,000
(6) Allowance for bad debts 8,720
Accounts receivable 8,720
(7) Accounts receivable 2,020
Allowance for bad debts 2,020
Cash 2,020
Accounts receivable 2,020
(8) Cash 27,000
Notes receivable 27,000
Cash 2,450
Interest receivable 525
Interest income 1,925
(9) Interest receivable 630
Interest income 630
(10) Bad debts 11,855.50
Allowance for bad debts 11,855.50
(11) Cash 35,000
Notes payable 35,000
Interest expense 600
Notes payable 18,900
Cash 19,500
(12) Operating expenses 456
Cash 456
Cash 6
Other income 6
(13) Sinking fund 3,000
Cash 3,000
(14) No entry
(15) General expenses 468,000
Cash 468,000
Answer:

1. A 2. C 3. B 4. D 5. B
6. C 7. C 8. B 9. B 10. D

Solution #18

Adjusting Entries as of Dec. 31, 2006

(2) Cardoza (a) Interest Expense 625.00
Trade Notes receivable 625.00
Maturity Value = Face Value P30,000
Discount (30,000 x 10% x 75/360) 625
Proceeds P29,375

(3) Pancho (b) Accounts Receivable 6,370.92

Trade Notes Receivable 6,000.00
Interest Receivable 120.00
Interest Revenue 250.92 Face Value P6,000.00
Interest (6000 x 12% x60/360) 120.00
Maturity value P6,120.00
Add.’l interest from due date , 8.30.06 to
12.31.06 (6,120 x 12% x 123/360) 250.92
Total amount due, 12.31.06 P6,370.92

(4) Betque © Notes receivable- Officers 15,000

Interest Receivable 350
Interest Revenue 350
Trade Notes Receivable 15,000
Accrued Interest as of 12.31.06
(15,000 x 12% x 150/360) = P750

(5) Gabutero OE: Cash 50,660

Notes Receivable 50,000
Interest Receivable 660

CE: Cash 50,660

NR – Discounted 50,000
Interest income 660
(d)
Adj: Notes Receivable 50,000
Interest Receivable 660
Interest income 660
NR – discounted 50,000
----------------------------------------- ----------- ----------
 OE: Notes Receivable 50,000
Interest Receivable 1,000
Cash 51,000

CE: Accounts Receivable 51,000

Cash 51,000

NR – discounted 50,000
Notes Receivable 50,000

(e) Accounts Receivable 51,000

NR – discounted 50,000
Trade Notes Receivable 100,000
Interest Receivable 1,000
Face Value P50,000
Interest (50,000 x 12% x 60/360) 1,000
Maturity Value P51,000
Discount (50,000 x 8% x 30/360) 340
Proceeds P50,660

(f) Accounts Receivable 510

Interest Revenue 510
(51,000 x 12% x 30/360)

(6) Noval (g) Trade Notes Receivable 35,000

Notes Payable- bank 35,000

(7) Gan (h) Accounts Receivable 8,080

Trade Notes Receivable 8,000
Interest Revenue 80
(8,000 x 12% x 30/360) = P80
(I) Interest revenue 160
Interest Receivable 160
(Accrued Interest as of 12.31.06
24,000 x 12% x 60/360) = P480
ANSWER:

1. D 2. D 3. D 4. A 5. B
6. D 7. A 8. C 9. D 10. D
SOLUTION #19

Requirement No. 1

1) Love M. Do
Sales returns 92,000
Accounts receivable 92,000

2) Strawberry Fields
No Entry

3) This Boy Company

No Entry

4) Girl Corporation
Sales 40,000
Accounts receivable 40,000

5) Ticket To Ride Corp.

Accounts receivable-Nontrade 160,000
Accounts receivable 160,000

6) Let It Be Corp
Cash 124,000
Accounts receivable 124,000

7) Hey Jude
No Entry

8) Get Back Company

No Entry

9) Yesterday Corp
No Entry

Requirement No. 2

Unadjusted balance 2,020,000

Add (Deduct) adjustments:
No. 1 (92,000)
No. 4 (40,000)
No. 5 160,000)
No. 6 (124,000)
Adjusted balance 1,604,000
SOLUTION #20

Requirement No. 1.

Accounts receivable, 1/1/12 209,000

Credit sales for 2012 1,500,000
Collections during 2012 (1,380,200)
Accounts written off - 2012 (31,000)
Accounts receivable, 12/31/12 297,800

Requirement No. 2

Allowance for doubtful accounts, 1/1/12 7,600

Doubtful accounts expense - 2012 (see computation below) 30,000
Accounts written off - 2012 (31,000)
Recovery of accounts written off - 2012 4,200
Allowance for doubtful accounts, 12/31/12 10,800

Computation of doubtful accounts expense - 2012:

Doubtful accounts expense for 2012 (P1,500,000 x 2%) 30,000

Computation of bad debt rate:

Year Credit sales AR writen-off Recoveries Net
2009 1,110,000 26,000 2,150 23,850
2010 1,225,000 29,500 3,750 25,750
2011 1,465,000 30,000 3,600 26,400
3,800,000 85,500 9,500 76,000

Net accounts written off (2009 to 2011) 76,000

Divide by credit sales (2009 to 2011) 3,800,000
Percentage of uncollectible accounts to charge sales 2.00%

SOLUTION #21

Requirement No. 1.a

GL/SL 60 61 to 90 91 to 120 over 120
Unadjusted balances 837,900 387,800 307,100 89,800 53,200
Add (deduct) adjustments:
AJE No. 1 (9,000) (9,000)
AJE No. 2 (6,100) (6,100)
AJE No. 3 11,000 11,000
Adjusted balances 833,800 387,800 318,100 83,700 44,200
Requirement No. 1.b

Age of accounts balance Rate Allowance

60 387,800 1% 3,878
61 to 90 318,100 2% 6,362
91 to 120 83,700 5% 4,185
over 120 44,200 25% 11,050
833,800 25,475

Requirement No. 1.c

Unadjusted allowance for doubtful accounts 55,495

Add (deduct) adjustments:
AJE no. 1 (9,000)
AJE no. 4 (squeeze) (21,020) (30,020)
Required allowance (see no. 1.b) 25,475

Balance per books (P41,895 - P6,100) 35,795

Add (deduct) adjustments:
AJE no. 2 6,100
AJE no. 4 (21,020) (14,920)
Doubtful accounts expense per audit 20,875

Requirement No. 2

Adjusting journal entries:

1. Allowance for doubtful accounts 9,000
Accounts receivable - over 120 days 9,000
To write off definitely uncollectible accounts

2. Doubtful account expense 6,100

Accounts receivable - 91 to 120 days 6,100
To correct entry made in recording accounts written off

3. Accounts receivable - 61 to 90 days 11,000

Advances from customers 11,000
To reclassify advances from customers

4. Allowance for doubtful accounts 21,020

Doubtful account expense 21,020
To adjust allowance to required balance
SOLUTION #22

Requirement No. 1 & 2

Principal 10,000,000
Direct origination cost 130,900
Origination fee received from borrower (P10M x .05) (500,000)
Carrying amount, 1/1/12 9,630,900

Amortization schedule

Date EI(11%) NI (10%) Disc. Amort. C.A.

1/1/11 9,630,900
12/31/11 1,059,399 1,000,000 59,399 9,690,299
12/31/12 1,065,933 1,000,000 65,933 9,756,232
12/31/13 1,073,186 1,000,000 73,186 9,829,418
12/31/14 1,081,236 1,000,000 81,236 9,910,654
12/31/15 1,089,346 1,000,000 89,346 10,000,000

Requirement No. 3

Carrying amount, 12/31/12 (see schedule) 9,756,232

Less PV of expected cash flows:
12/31/14 (P4M x 0.8116) 3,246,400
12/31/16 (P4M x 0.6587) 2,634,800 5,881,200
Loan impairment (bad debt expense) 3,875,032

REFERENCES:

 https://www.scribd.com>doc

 https://www.scribd.comSS
Cafoforo, Neil Joy P.
Estrella, Jose Enrique A.
Patenio, Sandra Faye S.