SAINT COLUMBAN COLLEGE

COLLEGE OF BUSINESS EDUCATION

INTERMEDIATE ACCOUNTING I
EXERCISE 2

ACCOUNTS RECEIVABLE

1. On December 31, 2018, Dreamer Company reported the “Receivables” account with a debit
balance of P2,000,000.

The allowance for doubtful accounts had a credit balance of P50,000 on same date.

Subsidiary details revealed the following:

Trade accounts receivable 775,000

Trade notes receivable 100,000
Installments receivable, normally due 1 year to two years 300,000
Customers’ accounts reporting credit balances arising from sales return (30,000)
Advance payments for purchase of merchandise 150,000
Customers’ accounts reporting credit balances arising from advance payments (20,000)
Cash advance to subsidiary 400,000
Claim from insurance entity 15,000
Subscriptions receivable due in 60 days 300,000
Accrued interest receivable 10,000
2,000,000
Required:
a. Prepare one compound entry to reclassify the receivables account.
b. Compute the amount to be presented as “trade and other receivables” under current
assets.
c. Indicate the classification and presentation of the other items excluded from “trade and
other receivables”.

2. Credible Company provided the following T-account summarizing the transactions affecting
the accounts receivable for the current year:

Accounts Receivable
Jan. 1 balance 600,000 Collections from customers 5,300,000
Charge sales 6,000,000 Writeoff 35,000
Shareholders’ subscriptions 200,000 Merchandise returns 40,000
Deposit on contract 120,000 Allowances to customer for 25,000
shipping damages
Claims against common carrier for 100,000 Collections on carrier claims 40,000
Damages
IOUs from employees 10,000 Collection on subscriptions 50,000
Cash advance to affiliates 100,000
Advances to a supplier 50,000

Required:

a. Compute the correct amount of accounts receivable.

b. Prepare one compound entry to adjust the accounts receivable.
c. Compute the amount to be presented as “trade and other receivables” under current
assets.
d. Indicate the classification and presentation of the other items.

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3. Tara Company provided the following information pertaining to accounts receivable on
December 31, 2016:

Days outstanding Estimated Amount Estimated uncollectible

0 – 60 1,200,000 1%
61 – 120 900,000 2%
Over 120 1,000,000 60,000
3,100,000
During the current year, the entity wrote off P70,000 in accounts receivable and recovered
P40,000 that had been written off in prior years.

On January 1, 2016, the allowance for uncollectible accounts was P100,000. Under the aging
method, what amount of allowance for uncollectible accounts should be reported on December
31, 2016?

a. 190,000 c. 130,000
b. 100,000 d. 90,000

4. Roxy Company provided the following information relating to accounts receivable for the
current year:

Accounts receivable on January 1 1,300,000

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

What is the balance of accounts receivable, before allowance for doubtful accounts on
December 31?

a. 1,825,000 c. 1,950,000
b. 1,850,000 d. 1,990,000

5. Ladd Company provided the following data for the current year:

Allowance for doubtful accounts – January 1 180,000

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

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

What is the allowance for doubtful accounts at year-end?

a. 435,000 c. 235,000
b. 265,000 d. 241,000

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