CHAPTER 4

Problem 4-2 (IAA)

Required
a. Compute the correct amount of accounts receivable.

Accounts receivable – January 1 600,000

Charge sales 6,000,000
Total 6,600,000
Less: Collections from customers 5,300,000
Write-off 35,000
Merchandise returns 40,000
Allowances to customers 25,000 (5,400,000)
Accounts receivable – December 31 1,200,000

b. Prepare one compound entry to adjust the accounts receivable.

Subscription receivable 150,000

Deposit on contract 120,000
Claim receivable 60,000
Advances to employees 10,000
Advances to affiliated 100,000
Advances to supplier 50,000
Accounts receivable 490,000

c. Compute the amount to be presented as “trade and other receivables” under current
assets.

Accounts receivable 1,200,000

Claim receivable 60,000
Advances to employees 10,000
Advances to supplier 50,000
Total trade and other receivables 1,320,000

d. Indicate the classification and presentation of the other items.

Classification and Presentation

1. Subscriptions receivable
2. Deposit on contract
3. Advances to affiliates
Problem 4 - 4 (ACP)
- either a short term or long term investment
-should be deducted from subscribed shared capital
- should be classified as noncurrent asset
- should be classified as noncurrent and presented as
long-term investment.

Required: Prepare journal entries to record the transactions.

 Fiancee Company
Journal Entries

1. Accounts receivable 4,000,000

Sales 4,000,000

2. Cash 1,470,000
Sales discount 30,000
Accounts receivable 1,500,000

3. Cash 1,000,000
Accounts receivable 1,000,000

4. Sales return 100,000

Accounts receivable 100,000

5. Sales return 20,000

Allowance for sales returns 20,000

Problem 4 - 8 (AICPA Adapted)

What total amount should be reported as current trade and other receivables?

Trade accounts receivable 2,000,000

Allowance for doubtful accounts (100,000)
Claims receivable 300,000
Trade and other receivables a. 2,200,000

Problem 4 - 9 (AICPA Adapted)

What amount should be reported as net realizable value of accounts receivable on

December 31?

Accounts receivable, January 1 1,300,000

Credit sales 5,500,000
Sales return (150,000)
Accounts written off (100,000)
Collections from customers (5,000,000)
Accounts receivable, December 31 1,550,000
Less: Allowances
Allowance for sales return (50,000)
Allowance for doubtful accounts (250,000)
Accounts receivable at NRV b. 1,250,000
Problem 4 - 12 (IAA)

1. What amount should be reported as accounts receivable on December 31?

Accounts receivable, Beginning 560,000

Charge sales 5,250,000
Recovered accounts 10,000
Collections from customers (5,150,000)
Writeoffs (35,000)
Merchandise returns (25,000)
Accounts, receivable, ending 610,000
Allowance to customers for shipping damages (15,000)
Accounts receivable at NRV b. 595,000

2. What total amount of trade and other receivables should be reported under current
assets?

Accounts receivable 595,000

Claims receivable (net of collection) 350,000
Advances to supplier 300,000
Trade and other receivables c. 1,245,000

3. What total amount of other receivables should be reported under noncurrent assets?

Deposit on long-term contracts 500,000

Subscriptions receivable 800,000
Noncurrent receivables c. 1,300,000

Problem 4 - 14 Multiple Choice (IAA)

1. d
2. d
3. a
4. c
5. d
6. c
7. d
8. c
9. a
10. c

Problem 4 - 15 Multiple Choice (AICPA Adapted)

1. a
2. a
3. a
4. d
5. b

CHAPTER 5

Problem 5 – 1 (IAA)

Required: Prepare adjusting entry to provide for doubtful accounts

a. Credit sales (5,000,000 x 75%) = 3,750,000

Doubtful accounts (3,750,000 x 2%) = 75,000

Adjusting entry:
Doubtful accounts expense 75,000
Allowance for doubtful accounts 75,000

b. Doubtful accounts (5,000,000 x 1%) 50,000

Adjusting entry:
Doubtful accounts expense 50,000
Allowance for doubtful accounts 50,000

c. Required allowance 80,000

Less: Credit balance of allowance 20,000
Doubtful accounts expense 60,000

Adjusting entry:
Doubtful accounts expense 60,000
Allowance for doubtful accounts 60,000

d. Required allowance (500,000 x 10%) 50,000

Less: Credit balance of allowance 20,000
Doubtful accounts 30,000

Adjusting entry:
Doubtful accounts expense 30,000
Allowance for doubtful accounts 30,000

Problem 5 – 5 (IAA)
Required:
a. Prepare journal entries to record the transactions.

Nostalgia Company
Journal Entries

Accounts receivable 7,935,000

Sales 7,935,000

Cash 4,410,000
Sales Discount 90,000
Accounts receivable 4,500,000

Cash 2,475,000
Sales Discount 25,000
Accounts receivable 2,500,000

Accounts receivable 15,000

Allowance for doubtful accounts 15,000

Cash 15,000
Accounts receivable 15,000

Cash 1,100,000
Accounts receivable 1,100,000

Allowance for doubtful accounts 55,000

Accounts receivable 55,000

Sales return 30,000

Accounts receivable 30,000

b. Prepare the adjustment for doubtful accounts if the entity follows the percentage of
accounts receivable consistently.

Rate (60,000/1,500,000) = 4%
Required allowance (4% x 1,250,000) 50,000
Allowance before adjustment (60,000 + 15,000 – 55,000) (20,000)
Doubtful accounts 30,000

Adjusting Entry:
Doubtful accounts expense 30,000
Allowance for doubtful accounts 30,000
c. Determine the net realizable value of accounts receivable at year-end?

Accounts Receivable Allowance for doubtful accounts

 1,500,000 8,000,000 55,000 60,000
7,935,000 115,000 15,000
15,000 55,000 30,000
30,000 55,000 105,000
9,450,000 8,200,000 50,000
1,250,000

Accounts receivable 1,250,000

Allowance for doubtful accounts (50,000)
Net realizable value 1,200,000

Problem 5 – 6 (PHILCPA Adapted)

Required:
a. What is the required allowance for doubtful accounts at year-end?

Amount Percent uncollectible Required Allowance Not

yet due 1,700,000
1-30 days past due 1,200,000 5% 60,000
31-60 days past due 100,000 25% 25,000
61-90 days past due 150,000 50% 75,000
Over 90 days past due 120,000 100% 120,000
3,270,000 280,000

b. How much would be the doubtful accounts expense for the current year?

Required Allowance 280,000

Allowance for doubtful accounts (170,000)
Doubtful accounts 110,000

c. What is the adjusting entry for the doubtful accounts expense for the current year?

Doubtful accounts expense 110,000

Allowance for doubtful accounts 110,000

d. What is the net realizable value of accounts receivable at year-end?

Accounts receivable, end 3,270,000

Allowance for doubtful accounts, end (280,000)
Net realizable value 2,990,000

Problem 5 - 9 (AICPA Adapted)

Required:
1. Determine the allowance for doubtful accounts on January 1, 2020.

January 1, 2020 Allowance for doubtful accounts

2,800,000 x 1% = 28,000

2. Determine the allowance for doubtful accounts on December 31, 2020 before
adjustment.

Allowance for doubtful accounts, January 1 28,000

Doubtful accounts recorded in 2020(3,000,000x1%) 30,000
Recovery 7,000
Total 65,000
Writeoff (27,000)
Allowance for doubtful accounts before adjustment, Dec. 31 38,000

3. Determine the required allowance on December 31, 2020.

3,000,000 x 1% 3,000
80,000 x 5% 4,000
60,000 x 20% 12,000
25,000 x 80% 20,000
Required Allowance, December 31, 2020 39,000

4. Prepare the adjustment to record the doubtful accounts expense for the current year.
39,000 – 38,000 = 1,000

Doubtful accounts 1,000

Allowance for doubtful account 1,000

Problem 5 - 12 (AICPA Adapted)

1. What amount should be reported as allowance for sales discount at year-end?

2,000,000 (0-15 days age) x 50% x 2% = a. 20,000

2. What amount should be reported as allowance for doubtful account at year-end?

0 - 15 days 2,000,000 0% 0
16 – 30 days 1,400,000 5% 70,000
31 – 60 days 400,000 10% 40,000
Over 60 days 200,000 50% 100,000
4,000,000 b. 210,000

3. What is the net realizable value of accounts receivable at year-end?

Accounts Receivable 4,000,000

Allowance for Doubtful Accounts (210,000)
Allowance for Sales Discount (20,000)
NRV at year end c. 3,770,000

Problem 5 – 18 (PHILCPA Adapted)

1. What amount should be reported as doubtful accounts expense for 2020?

Credit Sales Writeoffs Recoveries
2017 11,100,000 260,000 22,000
2018 12,250,000 295,000 37,000
2019 14,650,000 300,000 36,000
38,000,000 855,000 95,000

Rate = ,855,000−95,000-38,000,000. = 0.02 or 2%

Doubtful accounts expense for 2020 (15,000,000 x 2%) = b.300,000

2. What amount should be reported as allowance for doubtful accounts on December

31, 2020?

Allowance for doubtful accounts, January 1, 2020 80,000

Doubtful accounts expense for 2020 300,000
Recoveries in 2020 40,000
Total 420,000
Writeoff in 2020 (310,000)
Allowance for doubtful accounts, December 31, 2020 a.110,000

3. What is the net realizable value of accounts receivable on December 31, 2020?

Accounts receivable, January 1, 2020 2,070,000

Credit sales in 2020 15,000,000
Collection from customers in 2020 (14,000,000)
Writeoff in 2020 (310,000)
Accounts receivable, December 31, 2020 2,760,000

Accounts receivable, December 31, 2020 2,760,000

Allowance for doubtful accounts, December 31, 2020 (110,000)
Net realizable value a. 2,650,000

Problem 5 – 21 Multiple Choice (AICPA Adapted)

1. c
2. a
3. a
4. a
5. d
6. d
7. a
8. a
9. d
10. b