FAR EASTERN UNIVERSITY

INTERMEDIATE ACCOUNTING 1

ACCOUNTS RECEIVABLES
1. An entity provided the following information for 2019:

Accounts receivable – January 1 2,000,000

Credits sales 10,000,000
Collection from customers, excluding recovery of accounts of
written off 8,000,000
Accounts written off as worthless 100,000
Sales returns 500,000
Recovery of accounts written off 50,000
Estimated future sales returns on December 31 150,000
Estimated uncollectible accounts on December 31 per aging 300,000

What is the “amortized cost” of accounts receivable on December 31, 2019?

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2. During the current year, an entity reported beginning allowance for doubtful accounts P200,000, sales P9,500,000, sales returns and
allowances P1,000,000, sales discounts P500,000, accounts written off P300,000 and recovery of accounts written off P50,000. It is

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estimated that 5% of net sales may prove uncollectible.
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1. What amount should be reported as doubtful accounts expense?

2. What is the ending allowance for doubtful accounts?

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3. On December 31, 2019 an entity reported accounts receivable of P6,000,000 and allowance for doubtful accounts of P1,000,000 on
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January 1, 2019.
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Net Credit Sales Write-Offs Recoveries

2016 9,000,000 400,000 30,000
2017 13,000,000 600,000 70,000
2018 15,000,000 700,000 120,000
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2019 20,000,000 650,000 150,000

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Doubtful accounts are provided for as percentage of net credit sales. The percentage is computed annually by using the data of the three
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years prior to the accounts of the current year.

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1. What amount should be reported as doubtful accounts expense for 2019?

2. What is the allowance for doubtful accounts on December 31, 2019?

4. An entity provided the following accounts abstracted from the unadjusted trial balance at year-end:

Debit Credit
Accounts receivable 5,000,000
Allowance for doubtful accounts 50,000
Net credit sales 20,000,000

The entity estimated that 3% of the gross accounts receivable will become uncollectible.

What amount should be recognized as doubtful accounts expense for the current year?
FEU-Manila Int Act 1 DNF,CPA
https://www.coursehero.com/file/57098379/HO-2-Receivables-2pdf/
 5. From inception of operations, an entity provided for doubtful accounts under the allowance method and provisions were made monthly
at 2% of credit sales. No year-end adjustment to the allowance account were made. The balance in the allowance for doubtful accounts
was P1,000,000 on January 1,2019. During 2019, credit sales totaled P20,000,000, interim provisions for doubtful accounts were made
at 2% of credit sales, P20,000,000 of bad debts were written off. And recoveries of accounts previously written amounted to P50,000.
An aging was made on December 31, 2019.

Classification Balance Uncollectible

November – December 6,000,000 10%
July – October 2,000,000 20%
January – June 1,500,000 30%
Prior to January 1,2019 500,000 50%

Based on the review of collectability of the account balances in the “prior to January 1, 2019” aging category, additional accounts totaling
P100,000 are to be written off on December 31, 2019. Effective December 31, 2019, the entity adopted aging method for estimating
the allowance for doubtful accounts.

1. What is the required allowance from doubtful accounts on December 31, 2019

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2. What should be reported as doubtful accounts expense for the current year?

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3. What is the adjustment to the allowance for doubtful accounts on December 31, 2019?

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4. What is the net realizable value accounts receivable on December 31, 2019?

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Receivables Financing
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1. On December 1, 2019, an entity assigned on a non-notification basis accounts receivable of P5,000,000 to a bank in consideration for
a loan of 80% of the accounts less a 5% service fee on the accounts assigned. The entity signed a note for the bank loan.
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On December 31, 2019, the entity collected assigned accounts of P2,000,000 less discount of P200,000. The entity remitted the collections
to the bank in partial payment for the loan.

The bank applied first the collection to the interest and the balance to the principal. The agreed interest is 1% per month on the loan
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balance.
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The entity accepted sales returns of P100,000 on the assigned accounts and wrote off assigned accounts of P300,000.

1. What is the balance of accounts receivable assigned on December 31, 2019?

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2. What is the carrying amount of the note payable on December 31, 2019?
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3. What is the equity of the assignor is assigned accounts on December 31, 2019?

2. an entity factored P5,000,000 of accounts receivable. Control was surrendered by the entity. The transaction met the criteria to be
accounted for as a sale but subject to recourse for nonpayment. The fair value of the recourse obligation is P100,000. The finance
company assessed a fee of 5% and retained a holdback equal to 10% of the accounts receivable. In addition, the finance company
charged 12% interest computed on weighted average time to maturity of the accounts receivable for 30 days?

1. What amount was initially received from the factoring accounts receivable?

2. What total amount should be recognized initially as loss on factoring?

FEU-Manila Int Act 1 DNF,CPA

https://www.coursehero.com/file/57098379/HO-2-Receivables-2pdf/
 3. An entity accepted from a customer in settlement of an account a P4,000,000. 90-day 12% note dated august 31, 2019. On September
30, 2019, the entity discounted the note at 15% with recourse at the bank. The note was paid in full by the maker on maturity. The
discounting is accounted for as a conditional sale with recognition of a contingent liability.

1. What amount was received from the note receivable discounting?

2. What is the loss on note receivable discounting?

4. On April 1, 2019, an entity discounted with recourse a 9-month, 10% note dated January 1, 2019 with face of P6,000,000. The bank
discount rate is 12%. The discounting transaction is accounted for as a conditional sale with recognition of contingent liability.
On October 1, 2019, the maker dishonored the note receivable. The entity paid the bank maturity value of the note plus protest fee of
P50,000.

On December 31, 2019, the entity collected the dishonored note in full plus 12% annual interest on the total amount due.

1. What amount was received from the note receivable discounting?

2. What amount should be recognized as loss on note receivable discounting?

3. What is the total amount collected from the customer on December 31, 2019?

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4. If the discounting is secured borrowing, what is included in the journal entry to record the transaction?

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Notes Receivables

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1. On January 1, 2019, an entity sold equipment with a carrying amount of P4,800,000 in exchange for P6,000,000 noninterest bearing
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note due January 1, 2022. There was no established exchange price for the equipment. The prevailing interest rate for this note was
10%. The present value of 1 at 10% for three periods is 0.75.
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1. What amount should be reported as gain or loss on sale of equipment in 2019?

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2. What amount should be reported as interest income for 2019?

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3. What amount should be reported as interest income for 2020?

2. On December 31, 2019, an entity sold equipment with carrying amount of P2,000,000 in exchange for a noninterest bearing note
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of P5,000,000 requiring ten annual payments of P500,000. The first payment was made on December 31, 2020. The market interest
for similar note was 12%. The present value of an ordinary annuity of 1 is 5.65 for ten periods and 5.33 for nine periods.
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1. What was the carrying amount of the note receivable on December 31, 2019?

2. What was the gain on sale of equipment to be recognized in 2019?

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3. What amount should be recognized as interest income in 2020?

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4. What is the carrying amount of the note receivable on December 31, 2020?

3. Solid bank loaned P7,500,000 to a borrower on January 1, 2019. The terms of the loan were payment in full on January 1, 2024 plus
annual interest payment at 12%.

The interest payment was made as scheduled on January 1, 2020. However, due to financial setbacks, the borrower was unable to
make the 2021 interest payment.

The bank considered the loan impaired the projected the cash flows from the loan on December 31, 2021.

FEU-Manila Int Act 1 DNF,CPA

https://www.coursehero.com/file/57098379/HO-2-Receivables-2pdf/
 The bank had accrued the interest on December 31, 2021 but did not continue to accrue interest for 2021 due to the impairment of
the loan.

Amount projected
Date of cash flow December 31, 2021

December 31, 2022 500,000

December 31, 2023 1,000,000
December 31, 2024 2,000,000
December 31, 2025 4,000,000

Present value of 1 at
12%
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For one period .80
For two periods .71
For three periods .64
For four periods

1. What is the present value of the cash flows from the loan receivable on December 31, 2021?

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2. What amount should be recognized as impairment loss for 2021?

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3. What amount should be reported by the bank as interest income for 2022?

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4. What is the carrying amount of the loan receivable on December 31, 2022?

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FEU-Manila Int Act 1 DNF,CPA

https://www.coursehero.com/file/57098379/HO-2-Receivables-2pdf/

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