Professional Documents
Culture Documents
Chapter 3 - Receivables 3-1
Chapter 3 - Receivables 3-1
3-1.
a.
b.
c.
Accounts Receivable
Receivables from Employees (part of non-trade receivables) current assets
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, noncurrent asset or deduction from Shareholders Equity
i. Other Non-Trade Receivables Current asset or non-current asset depending on terms of
payment
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)
3-2.
(Ginoo Company)
Gross Method
Dec. 9 Accounts Receivable-First Lady
Sales
80,000 x 90% x 95%
10
68,400
68,400
50,000
Cash
Sales Discounts
Accounts Receivable-First Lady
67,032
1,368
26
40,000
31
Sales Discounts
Allowance for Sales Discounts
19
2014
Jan. 5
50,000
68,400
800
800
Cash
Allowance for Sales Discounts
Accounts Receivable-Teens Kingdom
39,200
800
Cash
Accounts Receivable-Mens World
50,000
Net Method
Dec. 9 Accounts Receivable-First Lady
Sales
68,400 x .0.98
40,000
40,000
50,000
67,032
67,032
Chapter 3 Receivables
10
49,000
19
Cash
Accounts Receivable-First Lady
Accounts Receivable-Teens Kingdom
Sales
67,032
Dec. 26
31
39,200
49,000
67,032
39,200
1,000
1,000
2014
Jan. 5
Cash
Accounts Receivable Teens Kingdom
39,200
Cash
Accounts Receivable-Mens World
50,000
Allowance Method
Dec. 9 Accounts Receivable-First Lady
Allowance for Sales Discount
Sales
10
Dec. 19
26
31
2014
Jan. 5
3-3.
39,200
50,000
68,400
1,368
67,032
50,000
Cash
Allowance for Sales Discount
Accounts Receivable-First Lady
67,032
1,368
40,000
1,000
49,000
68,400
800
39,200
1,000
1,000
Cash
Allowance for Sales Discount
Accounts Receivable-Teens Kingdom
39,200
800
Cash
Accounts Receivable-Mens World
50,000
(Colleco Supermarket)
June 1- Accounts Receivable Citibank
30 Cash
Accounts Receivable Metrobank
Credit Card Service Charges
Sales
Cash
50,000
2,450,000
1,764,000
1,470,000
116,000
5,800,000
3,234,000
13
40,000
Chapter 3 Receivables
Accounts Receivable - Citibank
Accounts Receivable - Metrobank
3-4.
(Colayco Company)
(1)
July 14 Allowance for Doubtful Accounts
Accounts Receivable-Moret Co.
10,000
10,000
31
Notes Receivable
Sales
12,000
Aug. 15
Cash
Notes Receivable
Sales
20,000
15,000
Cash
Credit Card Service Charge
Sales
4% x 20,000 = 800
19,200
800
12,300
Nov.
Nov. 4
Nov. 9
Nov. 15
15
Dec. 13
3-5.
2,156,000
1,078,000
9,000
Cash
Credit Card Service Charge
Accounts Receivable-Credit Card
5% x 9,000 = 450
8,550
450
12,000
35,000
20,000
12,000
300
9,000
9,000
10,000
Cash
Accounts Receivable-Moret Co.
10,000
Cash
Notes Receivable
Interest Revenue
15,000 x 12% x 120/360 = 600
15,600
10,000
10,000
15,000
600
(Format Company)
a.
14
P3,945,000
15%
P 591,750
Chapter 3 Receivables
b.
Carrying value, January 1, 2013
P3,945,000
Add amortization of discount during 2013
Carrying value, December 31, 2013
591,750
P4,536,750
(Formatted Company)
a.
3-7.
3- 8.
P4,566,400
15%
P 684,960
P3,251,360
15%
P 487,704
b.
Carrying value, January 1, 2013
P4,566,400
Add amortization of discount during 2012
Less first payment of principal
Carrying value, December 31, 2012
(HRV Company)
684,960
(2,000,000)
P3,251,360
(a)
P1,360,000
P1,240,000
P1,120,000
(b)
P 270,000
60,000
P 330,000
(c)
Non-current
P2,000,000
Current
P1,000,000
90,000
follows:
2.5 M + (5% x 7.5 M)
2,875,000
2.5 M + (5% x 5.0 M) = 2,750,000
2.5 M + (5% x 2.5 M) = 2,625,000
Total
or
2.5 M x 2.4869
(5% x 7.5 M) x 0.9091
(5% x 5.0 M) x 0.8264
(5% x 2.5 M) x 0.7513
Total
x
x
x
0.9091
0.8264
0.7513
P2,613,663
2,272,600
1,972,163
P6,858,426
P6,217,250
340,913
206,600
93,913
P6,858,676
15
Chapter 3 Receivables
(a)
(b)
2013
Jan. 1
Amortization Table
Payment of
Interest
Date
Principal
Paid
01/01/13
12/31/13
2,500,000
375,000
12/31/14
2,500,000
250,000
12/31/15
2,500,000
125,000
*difference is due to rounding off
Interest
Revenue
685,843
466,927
238,804*
Amortization
of Discount
310,843
216,927
113,804*
Journal entries
Notes Receivable
Discount on Notes Receivable
Gain on Sale of Land
Land
7,500,000 6,858,426 = 641,574 Discount
6,858,426 6,000,000 = 858,426 Gain
7,500,000
Cash
Discount on Notes Receivable
Interest Revenue
Notes Receivable
2,875,000
310,843
Cash
Discount on Notes Receivable
Interest Revenue
Notes Receivable
2,750,000
216,927
Cash
Discount on Notes Receivable
Interest Revenue
Notes Receivable
Pinky Pip Company
2,625,000
113,804
Dec. 31
Carrying
Value
6,858,426
4,669,269
2,386,196
------------
641,574
858,426
6,000,000
685,843
2,500,000
2014
Dec. 31
466,927
2,500,000
2015
Dec. 31
3-9.
238,804
2,500,000
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.
follows:
2.5 M + (14% x 7.5 M) = 3,550,000
2.5 M + (14% x 5.0 M) = 3,200,000
2.5 M + (14% x 2.5 M) = 2,850,000
Total
or
2.5 M x 2.48685
(14% x 7.5 M) x
(14% x 5.0 M) x
(14% x 2.5 M) x
Total
x
x
x
0.9091
0.8264
0.7513
P3,227,305
2,644,480
2,141,205
P8,012,990
P6,217,125
954,555
578,480
262,955
P8,013,115*
0.9091
0.8264
0.7513
16
Chapter 3 Receivables
a.
Amortization Table
Date
01/01/13
12/31/13
12/31/14
12/31/15
Payment of
Principal
2,500,000
2,500,000
2,500,000
Interest
Paid
1,050,000
700,000
350,000
Interest
Revenue
801,299
526,429
259,282*
Amortization
of Premium
248,701
173,571
90,718*
Carrying
Value
8,012,990
5,264,289
2,590,718
------------
Journal entries
2013
Jan. 1
Dec. 31
Notes Receivable
Premium on Notes Receivable
Gain on Sale of Land
Land
8,012,990 7,500,000 = 512,990 Premium
8,247,955 6,000,000 = 2,247,955 Gain
7,500,000
512,990
Cash
Premium on Notes Receivable
Interest Revenue
Notes Receivable
3,550,000
Cash
Premium on Notes Receivable
Interest Revenue
Notes Receivable
3,200,000
Cash
Premium on Notes Receivable
Interest Revenue
Notes Receivable
2,850,000
2,012,990
6,000,000
248,701
801,299
2,500,000
2014
Dec. 31
173,571
526,429
2,500,000
2015
Dec. 31
3-10.
90,718
259,282
2,500,000
(Word Company)
Uncollectible Accounts Expense
Allowance for Uncollectible Accounts
P52,000
50,000
17
P50,000
2,000
P52,000
Chapter 3 Receivables
3-11.
(Edit Company)
Allowance for Uncollectible Accounts, beg
Recovery of accounts previously written off
Uncollectible accounts expense for 2013
Allowance for Uncollectible Accounts, end
Accounts written off during 2013
3-12.
P 6,000
3,000
48,000
(12,000)
P45,000
b.
Accounts receivable
Sales
4,800,000
Cash
Sales discounts
Accounts receivable
3,920,000
80,000
4,800,000
4,000,000
c.
d.
Accounts receivable
Allowance for uncollectible accounts
5,000
Cash
Accounts receivable
5,000
Notes receivable
Accounts receivable
25,000
Cash
Notes payable-bank
400,000
Cash
Accounts receivable
150,000
Notes payable-bank
Cash
150,000
e.
f.
g.
h.
20,000
20,000
5,000
5,000
25,000
400,000
150,000
65,000
65,000
250
Accounts receivable
(450,000+4,800,0004,000,00020,00025,000150,000)
Less Allowance for uncollectible accounts
Amortized cost of accounts receivable
18
150,000
P1,055,000
59,000
P 996,000
250
Chapter 3 Receivables
3-13.
(Rav, Inc.)
Accounts Receivable, December 31, 2012
Sales on account during 2013
Cash received from customers
Cash discounts allowed: (882,000 98%) x 2%
(495,000 99%) x 1%
Recovery of accounts written off
Accounts written off as worthless
Credit memoranda for sales returns
Accounts Receivable, December 31, 2013
P18,000
5,000
P 337,000
1,500,000
(1,600,000)
(23,000)
3,000
(11,000)
(6,000)
P 200,000
P 12,000
3,000
(11,000)
15,000
P 19,000
Balance, beg
Sales on account
Recovery
Total
Balance, end
Write off
Total
3-14.
Accounts Receivable
337,000 Collections
1,500,000 Cash discounts
3,000 Write off
Sales returns
1,840,000 Total
200,000
1,600,000
23,000
11,000
6,000
1,640,000
12,000
3,000
15,000
30,000
19,000
(Revo Company)
Allowance for Uncollectible Accounts, January 1, 2013
Accounts written off
Recovery of accounts previously written off
Additional accounts written off
Allowance for Uncollectible Accounts, December 31, 2012
before adjustments (debit balance)
Required balance in Allowance account based on aging:
(5% x 240,000) + (25% x 20,000) + (50% x 30,000) + (90% x 24,000)
Required adjustment/Uncollectible Accounts Expense for 2013
P 34,000
(47,000)
7,000
(6,000)
(P12,000)
53,600
P65,600
P654,000
53,600
P600,400
19
Chapter 3 Receivables
3-15.
(Adventure Company)
a.
3-16.
P 2,000,000
600,000
P 1,400,000
P 1,200,000
10,000,000
(8,720,000)
20,000
( 400,000)
( 100,000)
P 2,000,000
b.
P190,000
100,000
(20,000)
(60,000)
P210,000
c.
Accounts Receivable
Less Allowance for Uncollectible Accounts
Amortized cost of accounts receivable, December 31, 2013
P2,000,000
190,000
P1,810,000
(Maynilad Company)
Alternative 1
Carrying value (10 M + 1.2 M)
Present value of future cash inflows:
Principal due on 12/31/15 (9M x 0.7972)
Interest for 2 years
9M x 8% = 720,000; 720,000 x 1.6901
Impairment loss
Entry: Restructured Notes Receivable
Impairment Loss Receivables
Notes Receivable
Interest Receivable
Alternative 2
Carrying value (10 M + 1.2 M)
Present value of future cash inflows:
2M + (8% x 10M) = 2,800,000 x 0.8929
2M + (8% x 8M) = 2,640,000 x 0.7972
2M + (8% x 6M) = 2,480,000 x 0.7118
20
11,200,000
P7,174,800
1,216,872
8,391,672
2,808,328
8,391,672
P2,808,328
10,000,000
1,200,000
11,200,000
2,500,120
2,104,608
1,765,264
Chapter 3 Receivables
2M + (8% x 4M) = 2,320,000 x 0.6355
2M + (8% x 2M) = 2,160,000 x 0.5674
Impairment loss
1,474,360
1,225,584
9,069,936
2,130,064
Alternative 3
Carrying value
Present value of future cash inflows:
Principal due on 12/31/15
10M x 0.7972
7,972,000
Interest due on 12/31/14 and 12/31/15
10M x 9% = 900,000; 900,000 x 1.6901 1,521,090
Impairment loss
Entry: Restructured Notes Receivable
Impairment Loss Receivables
Notes Receivable
9,493,090
506,910
Cash
Interest Receivable
1,200,000
Alternative 4
Carrying value
Present value of future cash inflows:
Principal due on 12/31/13
11.2M x 0.797193876
Interest due on 12/31/13 and 12/31/14
11.2M x 12% = 1,344,000;
1,344,000 x 1.6900510
Impairment loss
9,069,936
2,130,064
10,000,000
1,200,000
10,000,000
9,493,090
506,910
10,000,000
1,200,000
11,200,000
8,928,572
2,271,428
11,200,000
-0-
(Kate Company)
(a)
Cash
Notes Payable National Bank
(b)
3-18.
750,000
750,000
Current assets:
Trade and other receivables (including P900,000 of accounts
pledged as collateral for a loan with National Bank)
P2,000,000
Current liabilities:
Notes Payable National Bank
Interest Payable
P 750,000
7,500
(Lexus Company)
Amount of the loan
Less service charge (2% x 800,000)
Net proceeds from the assignment of accounts receivable
21
P650,000
16,000
P634,000
Chapter 3 Receivables
Sept. 1
Sept 1-30
800,000
Cash
Finance Charges
Notes Payable Pacific Bank
634,000
16,000
Cash
300,000
650,000
Oct. 1-31
Oct.
31
31
3.19.
Accounts Receivable
Accounts Receivable Assigned
Accord Company)
July 1
21
31
Aug. 1
300,000
300,000
6,500
10,000
400,000
100,000
3,040,000
160,000
150,000
Cash
Sales Discounts
Accounts Receivable Assigned
2% x 2,500,000 = 50,000
2,450,000
50,000
2,500,000
32,000
Cash
Accounts Receivable Assigned
22
400,000
100,000
Cash
Finance Charges
Notes Payable Bank
5% x 3,200,000 = 160,000
31
10,000
353,500
4,000,000
306,500
350,000
3,500
15
800,000
4,000,000
3,200,000
150,000
50,000
1,000,000
2,500,000
2,532,000
50,000
1,000,000
Chapter 3 Receivables
Sept. 1
320.
31
Nov. 30
Accounts Receivable
Accounts Receivable Assigned
300,000
707,000
300,000
2,000,000
Cash
Finance Charges
Notes Payable
1,410,000
90,000
15,000
985,000
Notes Payable
Interest Expense (515,000 x 0.12 x 1/12)
Cash
Accounts Receivable Assigned
515,000
5,150
279,850
b.
Dec. 31
684,000
36,000
80,000
Cash
Finance Charges
Notes Payable-Bank
3% x 600,000 = 18,000
582,000
18,000
10,400
(Hiku Company)
(a)
P1,080,000
(64,800)
P1,015,200
(b)
P 150,000
23
2,000,000
1,500,000
1,000,000
800,000
(Highlander Company)
a.
Sept. 1
Cash
Receivable from Factor
Loss from Factoring
Accounts Receivable
800,000 x 10% =80,000 Loss;
720,000 x 5% = 36,000 withheld
Nov. 1
3-22.
700,000
7,000
(Fortune Company)
Oct. 1
3-21.
(54,000)
96,000
800,000
600,000
10,400
Chapter 3 Receivables
(c)
3-23.
3-24.
P
P
1,500
51,500
(1,259)
50,241
( Edsamail Company)
(a)
(b)
Interest Receivable
Interest Revenue
500,000 x 8% x 7/12
a.
23,333
23,333
Cash
Loss on Sale of Notes Receivable
Notes Receivable
Interest Receivable
517,500
5,833
= P89,408
500,000
23,333
Cash
89,408
Liability on Discounted Notes
b.
89,408
= P76,664
= P75,404
75,404
3-25.
50,000
75,404
= P62,762
= P61,833
61,833
61,833
(Crosswind Corporation)
2013
Feb. 1
Notes Receivable
Accounts Receivable
60,000
Apr. 1
Cash
Liability on Discounted Notes
60,000 + (60,000 x .10 x 9/12) = 64,500
64,500 (64,500 x .12 x 7/12) = 59,985
59,985
24
60,000
59,985
Chapter 3 Receivables
Nov. 2
3-26.
59,985
4,515
66,000
60,000
4,500
66,000
(Explorer Company)
(a)
Accounts receivable factored
Purchase price
Purchase price of accounts receivable factored
Less amount withheld (5% x 1,700,000)
Net cash received from the factored accounts
(b)
Cash
Receivable from Factor
Loss on Factoring
Accounts Receivable
3.27.
P2,000,000
85%
P 1,700,000
85,000
P 1,615,000
1,615,000
85,000
300,000
Sales Returns
Receivable from Factor
30,000
Cash
55,000
2,000,000
30,000
30,000
(Nature Company)
(a)
1/1/12
Interest Revenue
Interest Receivable
2,800
2,800
(1)
Accounts Receivable
Sales
2,800,000
(2)
Cash
Sales Discounts
Accounts Receivable (2,218,000 180,000)*
Accounts Receivable Assigned *
2,200,000
18,000
(3)
Notes Receivable
Accounts Receivable
250,000
(4)
Cash
Notes Receivable
Interest Revenue
216,000
(5)
2,800,000
2,038,000
180,000
250,000
200,000
16,000
Cash
Liability on Discounted Notes
41,400
41,400
25
Chapter 3 Receivables
(6)
41,400
4,600
300,000
Cash
Finance Charges
Notes Payable
222,000
18,000
40,000
6,000
300,000
240,000
(7)
Accounts Receivable
Notes Receivable
Interest Revenue
15,900
(8)
12,000
(9)
Notes Payable
Interest Expense
Cash
(10)
180,000
3,000
12,000
183,000
20,000
20,000
(11)
Interest Receivable
Interest Revenue
*See item (9)
(b)
15,000
900
3,200
3,200
P1,014,100
26
95,000
815,900
120,000
3,200
(20,000)
P1,014,100
Chapter 3 Receivables
A
B
A
A
C
A
D
A
A
C
MC11
MC12
MC13
MC14
MC15
MC16
MC17
MC18
C
C
A
C
A
D
A
C
Problems
MC19
MC20
B
D
MC21
MC22
MC23
MC24
MC25
MC26
MC27
MC28
MC29
C
B
A
D
D
C
D
B
B
MC30
MC31
MC32
MC33
MC34
MC35
MC36
MC37
A
A
B
D
C
C
C
B
MC38
MC39
MC40
MC41
MC42
MC43
A
C
B
B
D
C
27
Chapter 3 Receivables
MC44
MC45
*
Date
July 1,
July 1,
July 1,
July 1,
July 1,
A
D
2012
2013
2014
2015
2016
Annual payment
902,500
902,500
902,500
902,500
Interest income
11% x 2,800,000=308,000
11% x 2,205,500=242,605
11% x 1,545,605=170,017
902,500-813,122=89,378
28
Reduction in principal
902,500-308,000=594,500
902,500-242,605=659,895
902,500-170,017=732,483
813,122
Balance
2,800,000
2,205,500
1,545,605
813,122
-0-