Catalan, Angelie

PROBLEM 3: EXERCISE
1. Solution:

Trade receivable:
Accounts Receivable 160,000
Add Back: Credit Balance in customer account 32,000
Adjusted Accounts Receivable: 192,000
Notes Receivable (Trade) 16,000
Total Trade Receivables: Requirement (a) 208,000
Non-Trade Receivables currently collectible:
Notes Receivable (Non-trade) 16,000
Dividends Receivable 3,200
Advances to Suppliers 19,200
Total current non-trade receivables 38,400
Trade and other Receivables: Requirement (b) 246,400

2. Solution

Invoice amount (10,000 x 80% x 90%) 7,200

Multiply by: 2%
Total available discount 144
Multiply by: 80%
Discount expected to be taken 115.2

Invoice amount 7,200

Less: Discount expected to be taken (115.20)
Transaction price 7,084.80

(a.) Date of Sale

Accounts Receivable 7,084.80
Revenue 7,084.80

Year-End Adjusting Entry

Accounts Receivable 57.6
Revenue 57.6
(b). Amounts of net revenue and accounts receivable to be reported in the financial
statements

Accounts receivable 7,200.00

Allowance for sales discount (57.60)
Accounts receivable – net 7, 142.40

Sales 7,200.00
Sales discount. (57.60)
Net sales 7,142.40

3.
(a) Bad debt expense
Formula: Bad debt expense = Percentage x Net credit sales

Total sales 1,320,000

Cash sales (220,000)
Gross credit sales 1,100,000

Sales returns and discounts on credit sales (13,200 – 2,200) (11,000)

Net credit sales 1,089,000

Multiply by: Percentage of net credit sales 2%

Bad debt expense

21,780

Dec. 31, Bad debt expense 21,780

20x1
Allowance for doubtful accounts 21,780

(b). Allowance for bad debts on Dec. 31

Allowance for bad debts on December 31 is computed as follows:
Allowance for bad
Debts
17,600 Jan. 1
Write-off 11,000 2,200 Recovery
 Bad debt
21,780 expense
Dec. 31
(squeeze) 30,580

(c). carrying amount of accounts receivable on December 31 20x1

Accounts receivable, Dec. 31 - gross 150,000
Allowance for doubtful accounts, Dec. 31 (30,580)
Accounts receivable, Dec. 31 -net 119,420

4.
(a) Bad debt expense
Formula: Required balance of allowance= Percentage x Accounts receivable, end.
The ending balance of accounts receivable is computed as follows:
Accounts
receivable
Jan. 1 40,000 2,500 Write-off
Collections on
accounts
135,00 (70,000 + recovery
Net credit sales 0 70,500 of 500)*
Recovery* 500
102,500 Dec. 31

The required balance of allowance for doubtful accounts is computed as follows:

Accounts receivable, Dec. 31 102,500
Percentage of receivables 5%
 Allowance for doubtful accounts - Dec. 31 5,125

Bed debt expense for the year is computed as follows:

Allowance for doubtful
accounts
5,000 Jan. 1
Write-off 2,500 500 Recovery
Bad debt
expense
2,125 (squeeze)
Dec. 31 5,125

Dec. 31 Bad debt expense 2,125

Allowance for doubtful accounts 2,125

(b) Net realizable value

of accounts receivable

Accounts receivable, Dec. 31 - gross 102,500

Allowance for doubtful accounts, Dec. 31 (5,125)
Accounts receivable, Dec. 31 -net
97,375

5.
Requirement: compute for the bad debts expense in 20x4
Solution:
Formula: Percentage= (Write-offs – Recoveries) ÷ ( Net credit sales)

The percentages to be applied on the beginning and ending balances of receivables in 20x4 are
computed as follows:

( Total Write−offs¿20 x 1¿20 x 3 ) less

(Total Recoveries¿20 x 1¿20 x 3)
Percentage ( Jan . 1 ,20 x 4 )= 20 x 1¿ 20 x 3 ¿
Total Net credit sales ¿
¿ [ ( 21 K + 30 K + 45 K )−( 3 K +9 K +15 K ) ] ÷(300 K +480 K +600 K )

¿ ( 96,000−27,000 ) ÷ 1,380,000
¿ 69,000 ÷1,380,000
=5%

( Total Write−offs¿20 x 1¿20 x 4 ) less

(Total Recoveries ¿20 x 1¿20 x 4 )
Percentage ( JDec .31 , 20 x 4 )= 20 x 1¿ 20 x 4 ¿
Total Net credit sales ¿

¿ ( 180,000−33,000 ) ÷ 2,100,000

¿ 147,000 ÷2,100,000

=7%

Bad debt expense is computed as follows:

 Allowance for doubtful
accounts
Jan. 1, 20x4 (300,000
15,000 x 5%)
20x4 Write-off 84,000 6,000 20x4 Recoveries
Bad debt expense
105,000 (squeeze)
Dec. 31, 20x4
(600,000 x 7%) 42,000

Dec. 31 Bad debt expense 105,000

20x4
Allowance for doubtful accounts 105,000

6.
%
Required allowance
Receivables Uncollectible
Days past dues balances (a) (b) (a)x(b)

 Not due (cash discounts

available) - 0 to 15 days of age 350,000 None -

 Not due (cash discounts

forfeited) - 16 to 30 days of age 210,000 None -

 1 - 30 days past due 175,000 3% 5,250

 31 - 60 days past due 140,000 10% 14,000

 61 - 90 days past due 105,000 15% 15,750

 91 - 120 days past due 70,000 35% 24,500

Totals 1,050,000 59,500

Requirement: Bad debt expense in 20x1

 Allowance for doubtful
accounts
28,000 Jan. 1
Write-off 6,000 2,000 Recovery
Bad debt
expense
35,500 (squeeze)
Dec. 31 59,500

7.
Requirement (a)
Net credit sales 4,200,000
Percentage of credit sales 2%
Unadjusted bad debt expense 84,000

(b)
Allowance for doubtful
accounts
Jan. 1, 20x1
12,600 (squeeze)
Write-off 79,800 18,900 Recovery
Unadjusted bad
84,000 debt
Dec. 31
unadjusted
balance 35,700
(c)
Required
allowance
Receivables % Uncollectible
Days outstanding balances (b) (c)=(a) x (b)

 0 – 60 252,000 1% 2,520

 61 – 120 (189K – 42K) 147,000 2% 2,940

 Segregated account 42,000 5% 2,100

 Over 120 (210K – 21K) 189,000 6% 11,340

Totals 630,000 18,900

(d)
Allowance for doubtful
accounts
12,600 Jan. 1, 20x1
Write-off (79K 100,00
+ 21K) 0 18,900 Recovery
Adjusted bad
87,400 debt (squeeze)
Dec. 31, 20x1
bal. 18,900

(e)
Gross accounts receivable, Dec. 31 before
651,000
adjustments
Additional Write-off at year-end (21,000)
Gross accounts receivable, Dec. after adjustments 630,000
Allowance for doubtful accounts, Dec. 31 (adjusted) (18,900)

Bad debt expense 611,100

(f)
 Dec. 31 Allowance for doubtful accounts 21,000
20x4
Accounts receivable 21,000
To record the additional write-off

The adjusted bad debt expense is compared with the unadjusted bad debts to determine the
necessary adjustments.

Adjusted bad debt expense 87,400

Unadjusted bad debt expense 84,000
Additional provision for bad debts 3,400

Dec. 31 Bad debt expense 3,400

20x4
Allowance for doubtful accounts 3,400
to record the additional bad debt
PROBLEM 4: MULTIPLE CHOICE-COMPUTATIONAL
1. B. 230,400

 ₱300,000 x 80% = 240,000 x 5% = 12,000 x 80% = 9,600

 240,000 – (9,600) = 230, 400

2. B. 86,427

 ₱100,000 x 90% = 90,000 x 97% = 87, 300 x 99% = 86,427

3. B. 270,000

 ₱250,000 + 20,000 = 270,000

4. D. 2,000

 60,000 x 0.05% = 3,000

5,000 x 10 = 500
+ 500
4,000
x 50%
2,000

5. A. 6,300

 Credit Sales 450,000

10,800
x 3% 18,000 13,500
13,500
6,300

6. C. 38,000

 A/R 1,000,000
x 3%
30,000
+ 8,000
38,000

7. A. 9,000
  120,000 x 1% = 1,200
90,000 x 2% = 1,800
100,000 x 6% = 6,000
9,000

8. C. 311,000
A/R Allow. For DA

`150,00 9,000 12,000
0 410,000 9,000 2,000
600,000 15,000
331,000 20,000
 331,000 - 20,000 = 311,000

9. A. 150,000
A/R

80,000 10,000
150,000 120,000

100,000
 10,000 + 120,000 = 130,000 + 100,000 = 230,000 – 80,000 = 150,000

10. B. 230,000;0

 250,000 – 20,000 = 230,000