INTERMEDIATE ACCOUNTING 1 - RECEIVABLES

1. Eatable Company, a VAT-registered entity is engaged in the following transactions during the month of
December, the last month of the calendar year:
July 1 Sold merchandise to A Company for P50,000, 2/10, n/30.
July 2 Sold merchandise to B Company for P200,000, 2/10, n/30.
July 3 Sold merchandise to C Company for P300,000, 2/10, n/30
July 12 Received payment from B Company for the July 2 sale.
July 30 Received payment from A Company for the July 1 sale.
July 31 Sales returns granted during the month amounted to P10,000.
July 31 Sales return estimated at the end of the year is P15,000.

Assuming the invoice price of sold goods is inclusive of 12% VAT, and that the related freight cost of the
transaction is P2,000.
Required:

Prepare the journal entries on the books of Eatable under:

CASE 1: Gross method, assuming the following freight terms:

a. FOB DESTINATION AND FREIGHT COLLECT.
b. FOB DESTINATION AND FREIGHT PREPAID.
c. FOB SHIPPING POINT AND FREIGHT COLLECT.
d. FOB SHIPPING POINT AND GREGHT PREPAID.
CASE 2: Net method, assuming the following freight terms:
a. FOB DESTINATION AND FREIGHT COLLECT.
b. FOB DESTINATION AND FREIGHT PREPAID.
c. FOB SHIPPING POINT AND FREIGHT COLLECT.
d. FOB SHIPPING POINT AND GREGHT PREPAID.

2. Icon Company provided the following data for the current year:
Sales on account 3,600,000
Notes receivable to settle accounts 400,000
Provision for doubtful accounts 90,000
Accounts receivable determined to be worthless 20,000
Merchandise returned by the customer 15,000
Collections received to settle accounts 2,450,000
Discounts permitted to be taken by customers 45,000
Collections received in settlement of notes 150,000

Prepare the journal entries to record the transactions and compute the net realizable value of accounts
receivable.

3. 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 Collection from customers, including post- 5,300,000
dated customers check of P30,000
Charge Sales 6,000,000 Writeoff 35,000
Shareholders’ subscriptions 200,000 Merchandise returns 40,000
Deposit on contract 120,000 Allowance to customers for shipping 25,000
damages
Claims against common carrier for 100,000 Collection on carrier claims 40,000
damages
IOUs from employees 10,000 Collection on subscriptions 50,000
Cash advance to affiliates 100,000 Customers’ accounts reporting credit 30,000
balances arising from sales reurns
Advances to suppliers 50,000
Claim from insurance entity 15,000
Accrued interest receivable 10,000
Trade notes receivable 100,000

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 the current assets.
d. Indicate the classification and presentation of the other items.
4. Marvelous Company reported the following information before adjustments at year-end:
Accounts receivable 500,000
Notes receivable 200,000
Allowance for doubtful accounts 20,000
Sales 5,000,000
Sales returns and allowances 30,000
Sales discount 20,000

Prepare the adjusting entry to provide for doubtful accounts under each of the following independent
assumptions:
a. Past experience indicates that 75% of all sales are credit sales and that an average 2% of credit sales may
prove uncollectible.
b. One percent of gross sale may prove uncollectible.
c. An analysis of the aging of trade receivables indicates that account receivable in the amount of P80,000 may
prove uncollectible.
d. The policy is to maintain an allowance for doubtful accounts equal ton 10% of the outstanding accounts
receivable.

5. On January 1, 2018, Rampant Company reported that the allowance for doubtful accounts has a credit balance of
P170,000.

Bad debt recoveries and bad debts written off in the current year were P30,000 and P235,000, respectively.

The allowance account had been previously calculated as a percentage of net sales.

It was decided however to provide for doubtful accounts commencing with the December 31, 2018 adjusting entry
on the basis of an analysis of the age of the receivables.

The following schedule was prepared:

Percent uncollectible
Not yet due 1,700,000 NIL
1-30 days past due 1,200,000 5
31-60 days past due 100,000 25
61-90 days past due 150,000 50
Over 90 days past due 120,000 100
Additional accounts to be written off 30,000

Required:
1. What is the required allowance for doubtful accounts on December 31, 2018?
2. How much would be the doubtful accounts expense for the current year?
3. What is the adjusting entry for the doubtful accounts expense for the current year?
4. What is the net realizable value of accounts receivable on December 31, 2018?

6. On January 1, 2018, Nostalgia Company reported the following information:

Accounts receivable 1,500,000
Allowance for doubtful accounts 60,000

The following summary transactions affecting accounts receivable occurred during the current year:

Sales- all on account 2/10, 1/15, n/60 7,935,000

Cash received from customers 8,000,000

The cash received from customers included the following:

Customers paying within the 10-day discount period 4,410,000
Customers paying within the 15-day discount period 2,475,000
Recovery of accounts written off 15,000
Customers paying beyond the discount period ?

Accounts receivable written off as worthless 55,000

Credit memoranda for sales return 30,000

Required:
a. Prepare journal entries to record the transactions.
b. Prepare the adjustment for doubtful accounts if the entity follows the percentage of accounts receivable
consistently.
c. Determine the net realizable value of accounts receivable on December 31, 2018.