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02sol - Receivables - WB - 1st
02sol - Receivables - WB - 1st
SUMMARY OF PROBLEMS
Requirement No. 1
1) Love M. Do
Sales returns 92,000
Accounts receivable 92,000
2) Strawberry Fields
None
4) Girl Corporation
Sales 40,000
Accounts receivable 40,000
6) Let It Be Corp
Cash 124,000
Accounts receivable 124,000
7) Hey Jude
None, this is misposting only in the SL. However, the customers' ledger should be adjusted.
9) Yesterday Corp
None, this is misposting only in the SL. However, the customers' ledger should be adjusted.
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
PROBLEM NO. 3 - Praktis Company
Per Books Adjustments Per Audit
Accounts receivable 442,500 1 (16,400) 387,400
2 15,000
3 (21,000)
4 (12,000)
5 (1,200)
6 (18,000)
7 (1,500)
Requirement No. 1
Category Aging ratio AR Balance Rate Allowance
1 – 10 days 64% 960,000 1.00% 9,600
11 – 30 days 18% 270,000 2.50% 6,750
31 – 60 days 8% 120,000 5.00% 6,000
61 – 120 days 5% 75,000 20.00% 15,000
121 – 180 days 3% 45,000 35.00% 15,750
over 180 days 2% 30,000 80.00% 24,000
100% 1,500,000 77,100
Requirement No. 2
Doubtful accounts expense 22,300 *
Allowance for doubtful accounts 22,300
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
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
Requirement No. 1
Note receivable from sale of plant
Balance, 12/31/12 (P6,000,000 - P2,000,000)
Less installment due on April 1, 2013
Note receivable from officer, due 12/31/14
Note receivable from sale of equipment
Present value of note, 4/1/12 (P800,000 x 0.797)
Discount amortization-2012 (P637,600 x 12% x 9/12)
Note receivable from sale of land
Balance, 12/31/12
Less principal installment due on 7/1/13
Total amount to be received 902,500
Less interest (P2,800,000 x 11%) 308,000
Total noncurrent receivables, 12/31/12
Requirement No. 2
Note receivable from sale of plant due on 4/1/13
Note receivable from sale of land (see no. 1)
Current portion of long-term receivables
Requirement No. 3
Note receivable from sale of plant (P4,000,000 x 12% x 9/12)
Note receivable from sale of land (P2,800,000 x 11% x 6/12)
Accrued interest receivable, 12/31/12
Requirement No. 4
Note receivable from sale of plant:
P6,000,000 x 12% x 3/12 180,000
P4,000,000 x 12% x 9/12 360,000
Note receivable from officer (P1,600,000 x 10%)
Note receivable from sale of equipment (P637,600 x 12% x 9/12)
Note receivable from sale of land (P2,800,000 x 11% x 6/12)
Total interest income for 2012
4,000,000
2,000,000 2,000,000
1,600,000
637,600
57,384 694,984
2,800,000
594,500 2,205,500
6,500,484
2,000,000
594,500
2,594,500
360,000
154,000
514,000
540,000
160,000
57,384
154,000
911,384
PROBLEM NO. 8 - Pedro Company
Requirement No. 2
PROBLEM NO. 9 - My Love Corporation
Requirement No. 1
PVF used to calculate the annual payment (P1.2M/P341,180) 3.5172
Ordinary annuity factor at 13% for 5 periods 3.5172
Requirement No. 4
Amount reported under current assets
[P1,705,900 - (P341,180 x 2)] 1,023,540
Should be (refer to amortization schedule) 236,456
Net misstatement of WC, 12/31/12 - over (under) 787,084
Amortization schedule:
Date Payment Interest (13%) Principal CA
1,200,000
12/31/11 341,180 156,000 185,180 1,014,820
12/31/12 341,180 131,927 209,253 805,567
12/31/13 341,180 104,724 236,456 569,111
12/31/14 341,180 73,984 267,196 301,915
12/31/15 341,180 39,265 301,915 -
1,705,900
PROBLEM NO. 10 - Merlyn, Inc.
Requirement No. 2
1/1 Notes receivable 25,000
Accounts receivable 25,000
Composition:
Robinson (P70,000 - P30,000) 40,000
Tripper (received PDC on 11/1) 8,000
Adjusted notes receivable-trade, 12/31/12 48,000
Notes:
1) NR from Pepper - collected on 12/31/12
2) NR from Anna - accepted equipment in full settlement on 12/27/12
3) NR from Julia - non-trade
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
826
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
PROBLEM NO. 12 - Theory
1 D
2 B
3 A
4 D
5 D
6 D
7 C
8 B
9 B
10 A
11 D
12 B
A B C D
1 Cash on hand and in bank 38,700 35,002 34,402 35,502
2 Notes receivable 4,000 4,500 5,000 5,500
3 Accounts receivable 36,000 40,000 42,000 38,000
4 Allow. for doubtful accounts 1,800 2,000 2,100 1,900
5 Accounts receivable-net 40,100 38,000 40,000 39,900
6 Accounts receivable-others 2,750 - 500 1,000
7 Advances to officers and employees 3,840 1,000 2,840 3,740
8 Marketable securities 13,000 10,750 8,500 4,250
9 Allow. for decline in MV of marketable sec. 1,375 250 1,125 -
10 Inventories 15,400 20,000 24,600 16,000
11 Prepayments 100 500 - 900
12 Total curent assets 111,904 113,302 113,950 112,802
13 Property, plant and equipment 990,000 1,910,000 910,000 940,000
14 Accumulated depreciation 346,000 344,000 350,000 356,000
15 PPE-net 566,000 1,566,000 606,000 584,000
16 Total assets 677,904 713,950 679,302 678,802
17 Accounts payable 600 4,000 5,200 2,800
18 Accrued expenses 2,800 4,000 5,200 1,200
19 Total current liabilities 2,800 5,200 4,000 1,200
20 Bonds payable 397,000 400,000 363,000 360,000
21 Bond discount 37,000 3,000 43,000 40,000
22 Total liabilities 400,000 405,200 363,000 368,200
23 Common stock 311,102 200,000 108,750 308,750
24 Retained earnings, end. 125,104 108,750 111,102 94,750
25 Net sales 944,000 948,000 950,000 952,000
26 Cost of sales 669,600 665,000 661,000 664,400
27 Gross Profit 280,400 282,400 285,000 287,000
28 Operating expenses 270,798 264,798 270,000 264,000
29 Operating income 23,602 15,000 17,602 18,400
30 Other income 5,000 7,250 5,500 7,750
31 Other charges 6,500 9,000 6,000 3,000
32 Net income 16,352 11,000 17,000 14,000
33 Gain on sale of Maretable securities-SMC 1,000 2,250 1,750 -
34 Bond discount amortization 1,000 4,000 3,000 -
35 Dividend income-SMC Co. common 1,000 500 2,000 1,500