debts recognized IN prob’ OF loss 1s PY, the balance of the allowance account at the start of the period must be P6, Quick Co. provides 30-day credit period to its customers, In 10. Quick Co.'s aging schedule, receivables under the age bracket mpi to 150 days” would be considered “91 to 120 past due.” PROBLEM 2: MULTIPLE CHOICE - THEORY 1. Which of the following is classified as "trade receivable?" a. claim for tax refund b. advances to officers, employees and affiliates ¢. dividends receivable @ none of these 2. Trade receivables are presented as current assets a. when they are collectible within one year. b. when they are collectible within an entity’s normal operating cycle. : ¢. when they are backed by sufficient collateral security. (d when they are collectible within an entity’s normal operating cycle, even if the normal operating cycle extends beyond one year. 3. It is a formal, written instrument of credit that has been received for the amount a customer owes. a. check c. voucher b. accounts receivable d. note receivable 4. Which of the following receivables is most ‘likely to be Presented as current asset? a. Receivable from a subscriber of the entity's own shares b. Advances to an affiliate in which the settlement date is not yet agreed upon i c pe ravelvctles from the entity's officers colecie beyond 12 months from the balance sheet date = hose Long-term trade receivables of a construction firm w Normal operating cycle extends beyond one year |194 giminale a ™ adjustin® on tale ina payable account receivable ecount oF aa a, decreases to! rect ose 2 increas ttl rece able account choice (a) for a payable ¢. choice p) for rece” accoun! P d, does ™ affect total receivabl i psequently measured at their Accounts ivable are Ssubs™ ; recoverable pistorical costs. ch of the following methods of estimating ple accounts isin conformance with the PFRSs? z b a. Allowance method c.aor d. none of these b. Direct write Which of the following, methods may be -used to estimate doubtful accounts? 1.’ percentage I. percentage mw. aging of receivables. Iv. combination of these methods c. Mand Ii only a. Ionly b. [Hand Ill d. all of these of credit sales of receivables . The amount computed under the percentage of credit ae method is the a. bad debts expense for the period. b. required balance of the allowance account. c aorb d, none of these able , The amount n computed under t i “ “ee methods is the te 4 et expense for the period. ‘ed balance of the allowance account. c. aorb 4 ore: h edit balance in 4 ] jpeer hes 10. b iC d d, none of these idl he following may not be which of t an acceptable m computing for doubtful accounts to be charged to rene r oss? a, Percentage of sales . Percentage of ending balance of accounts receivable Based on age of accounts . Partly based on aging and partly based on percentage of specific accounts receivables PROBLEM 3: EXERCISES A Information from the records of Twilight Co. is shown below: Accounts receivable, net of ?32,000 credit balance in customers’ accounts 160,000 Notes receivable (trade) 16,000 Notes receivable (non-trade), ?16,000 due one year 80,000 Dividends receivable 3,200 Subscriptions receivable 6,400 12,800 Advances to officers (due in 18 months) Accounts payable - net of 19,200 debit balance in suppliers’ accounts 9,600 Requirements: Compute for (a) total trade receivables and (b) total current receivables. 2 Redquirements: a, . mn Provide the journal entry on the date of sale An entity sells inventory with a list price of P10,000 under credit terms of 20%, 10%, 2/15, n/30. The entity uses PERS 15 and estimates that only 80% of the cash discount will be taken. By the end of the reporting period, the account receivable ‘ Not yet settled arid the entity. changes its estimate of cas discount to be taken to 40%. and the year-end adjusting entry,Gh q —_— revenue and t ; Account, cial statements. 19% of nel ° amounts the a in the finan b, Determine be report receivable t0 et credit sales will becom, 9% of its 3. Coffee Co. estimates that 2% oie ilove: uncollectible. Relevant inform: Nad . Allowance for doubtful accounts, Jan. * | i fl * Write-offs z ie « Recoveries , + Sales (including cash sales of ene) Seale 1,320,009 Sales returns and discounts (inclu ing P2, ae returns on cash sales) 330,000 « Accounts receivable, Dec. 31 Requirements: Compute for the following: (a) Bad debt expense, (b) Allowance for bad debts on Dec. 31, and (c) Carrying amount of accounts receivable on Dec. 31, 20x1. 4, Arabica Co. estimates that 5% of its receivable will become uncolléctible. Relevant information follows: Accounts receivable, Jan. 1 40,000 Net credit sales - 135,000 Collections from customers (excluding recoveries) 70000 Allowance for doubtful accounts, Jan. 1 50 Write-offs 2,500 Recoveries 500 Percentage of receivables ss Requirements: Compute for the (a) Bad debt expense and (b) bs realizable value of accounts receivable 5. Aro i Secte dae has been using the direct write-off method ing bad debts, In 20x4, Ai Co, adopte Percentage of recejt , Aroma Co. F o computed eceivables method, The percentage '® “a maximum ie, on all available historical data ¥P ur years, Relevant information followsPre a acount Reels 197 eT Wiiteofs "Recoveries Wet wearer” aa 30,000 9,000 480,000 20x3 45,000 15,000 % 600,000 ned 84,000 6,000 720,000 180,000 33,000 2,100,000 ‘The balances of accounts receivables on Jan. 1, 20x4 and Dec. 31, 20x4 are P300,000 and P600,000, respectively. ss Requirement: Compute for the bad debts expense in 20x4. 6. Morning Co. consistently provides its customers a credit term of “2/15, n/30” and uses the- aging of receivables method in estimating doubtful accounts. Morning Co. prepared the following schedules on Dec. 31, 20x1:__* —___Aseindays___Receivable balances _ 0-15 350,000 16-30 210,000 31-60 175,000 61-90 140,000 91-120 105,000 121-150 70,000 * Total accounts receivables 1,050,000 The estimated percentages of collectability are as follows: Accounts that are overdue for less than 31 days 97% Accounts that are overdue 31 - 60 days 90% Accounts that are overdue 61-90 days 85% Accounts that are overdue 91 — 120 days 65% Accounts that are overdue for over 120 days » 40% The allowance for bad debts has a balance of P28,000 on Jan. 1, Xl: During 20x1, P6,000 accounts were written-off and’ P2,000 Were Tecovered, Requirements; Compute for the bad debts expense in 20x1.On Dec. 31, Fos 2 mer include’ Requirements: Compute forthe following: a b meas 1 oe balance of the allowance account on : brome debts expense for the year. e historical cost of accounts receivable o" 2 Jes in determining by ‘and the aging of Teccray, og Co's BiB schedule g dit 54 orts ecovered P18) 79,800 accounts and at 42,000 account d in the “61-120 das a 21,000 accout worthless 0. ts during the eat Co. determined thi receivable from a certain custo! wipanding’ group 18 95% call peuded inthe “Over 120 days out and needs to be written-off. ectible and standing” group is ed during the yeal. ary 1, 20%): Dec. 31, 20 Unadjusted bad debt expense recogni Balance ofthe allowance for bad debts on Jan pec. Provide the le necessary year-end adjusting entry(ies)- PROBLEM 4; : MULTIPLE, CHOICE - COMPUTATIONS» a On Dec, 31, 204 ’: 1, Enti 00,000 and tenn nrg Sells goods with Tit Pew i Fina of 4 of "20% trade discount, 5/10, |cceivable units Re ca I eee ies PFRS 15 and esti A applies PFRS imates that onl discount will be taken. How much net Repeat of the cash on Dec. 31, 20x1? ©'Is recognized a. 240,000 b, 230,400 ¢, 228,000 d, 182,400 Tank Co. sold goods with a list price of A term of 10%, 3/10, 1/15, n30. Based on fin oe = Aaiae all customers take the highest available cash dlseeint Under the net method, how much receivable is recognized at the point of sale? i a. 87,300 ; b. 86,427 c. 92,048 d. 90,824 3, On December 29, 20x1, Fender Co. sold goods with selling price of 250,000, on account. Fender Co. shipped the goods on that date and paid shipping costs of P20,000. The terms of the sale are FOB shipping point, freight prepaid. The buyer received the goods, and settled the account, on Jan. 17, 20x2. How much cash was received from the buyer? a. 250,000 'b. 270,000 c. 230,000 d. 210,000 4, Wayen, Inc. sells to wholesalers on terms of 2/15, net 30. Wayen has no cash sales but 50% of Wayen's customers take advantage of the discount. Wayen uses the gross method of recording sales and trade receivables. An analysis of Wayen's trade receivables at December 31, 20x1 revealed the following: e Amount Collectible 0-15 days 100,000 100% 16-30 days 60,000 95% 31-60 days 5,000 90% Over 60 days 2,500 500 167,500 In its December 31, 20x1 balance sheet, what amount should Wayen report for allowance for. discounts? a. 1,000 b. 1,620 ¢. 1,675 d, 2,000 (atcray200 A ; ‘tains to Christing ing information pert Cop, % uy son year ended Dec. 31, 20x1 ae aia in allowance for bad debts mde written off during 20x1 “Fan. 1, 29, ony wae According to past experience, 3% of Chris uncollectible. After provision is ma eb e ee the year ended December 31, 20x1, the Allovane uncollectible accounts balance would be h 2, 6300 b. 13,500 ¢.24,300 4.315, (AICPA) t tine 's Credit ide for bad q sis were abstracted from Claudette Cay unadjusted trial balance at December 31, 20x1; Accounts Teceivable 1,000,000 Allowance for Uncollectible accounts 8,000 Net credit sales 3,000,000 Claudette estimates that 3% of the 8rOss accounts receivable wil become Uncollectible. “After adjustment at December 31, 20x1, the allowance for UNcollectible accounts, of should have a credit balan ©. 38,000 d. 30,000 4,000 the,” Rosa wrote Off P7,000 in nr tlvables and recovere! at that hag eon Written off in pri “2S. Rosa’s Decembé! 0% allowance for Nttcollectible accounts” Rosa’s 88 P22,000, Unde! ba EP.E riowble sts Rei SRC ae 20 method, what amount of allowance for r the aging id Roea feport on uncollecti | accounts shou! sa report at December 31, 20x12 ad | 75,000 b.10,000 13,000.49 arch) aon Radio Co. had accounts receivable of P1! for doubtful accounts of 12,000 at mee riod, During the period, Radio Co. made tla sat na P1,000,000 (40% were cash sales), collected P410,000 eeanle (excluding recoveries), wrote-off P9,000 accounts, recovered 2,000 accounts, and recognized bad debts expense of P15,000. 8. How much is the carrying amount of accounts receivable at the end of the period? a. 279,000 b. 331,000 c. 311,000 d. 351,000 9, Light Co.’s accounts. receivable balances at the beginning and - end of the period were P80,000 and, P100,000, respectively. Write-offs and recoveries during the period amounted: to P10,000 and 8,000, respectively. Collections of ‘sales on account during the period totaled 120,000, excluding the recoveries. How much is the total credit sales during the period? . a. 150,000 b. 170,000 c. 190,000 d. 120,000 10. In its December 31 balance sheet, Devin Co. reported trade : accounts réceivable of 250,000 and related allowance eet uncollectible accounts of P20,000. What is the tot oe tisk of accounting loss related to Devin's trade ean : receivable, and what amount of that risk is off BR isk? op i . 2) Off-balance-sheet tisk? (Item 1) Risk of accounting loss; (Item 2) Off |. 250,000; 20,000 ae 20,000 wucls09 .230,000;0 €- 230,000 200gxue~ ROBLEM 6:F CLASSROOM DISCUSSION Trade and on-trade receivables 1, The records of Wee Co. on Dec. 31, zd show the follow; Accounts receivable, net of P15,000 credit balance in customers’ accts, 4 Allowance for uncollectible accounts : 0%) oC Notes receivable (non-trade) ~ due on Dec. 31, 20x5 ie v Claim for tax refund (approved by BIR and due on demand) sn /Advances to affiliates (payment due date not yet agreed upon) coum c Advances to officers (due in6 months) ifm ( Dividends receivable wn ¢ Selling price of unsold goods sent out on consignment , at 140% of cost 800 \oCSecurity deposit ona long-term lease. 5aat Total . 1,700.00 Beene Compute for the correct amount of total receivals ae -classifications for the following: trade receivables, receivables, current receivable and non-current receivables oe of trade receivables ; De for ae 20x1, Bye-bye Duck Co. received 25? sae - oy foes with selling price of PLP ceephilites pec by Bye-bye Duck Co. on Dece™ 9,1 Te received by the buyer on January ee le ow Ppeceivable , acoouls 21 shipping costs amounted to P50, B: eceivable on January 5, 20x2, yerbye Duck Co, collected the r ment: Provide the entries under eacl we terms: (a) FOB shipping point, idht aie sein fight prepaid; (c) FOB shipping point, freight ee oad (@) FOB destination, freight collect qrade and Cash discounts 3, Farmer Dell Co. sold goods with a list price of P100,000 ona credit term of 10%, 3/10, n/45. Requirement (a): Traditional GAAP Provide the journal entries under the (1) Gross method and (2) Net method, respectively. Use the following assumptions: the consideration is collected: a. within the discount period; and b. beyond the discount period. Requirement (b): PFRS 15 Additional information: Inaccordance with PFRS 15, Farmer Dell Co. estimates that 80% of the available cash discount will be taken by the customer. Provide the journal entries. Assume (1) Farmer Dell Co. does not.use a sales discount account; and (2) Farmer Dell Co. uses @ sales discount account. Assume further that the estimate coincides with actual result, 4 {counting for bad debts | The balances of Boom Co.’s accounts receiv for bad debts at the beginning of the period were 8,000, respectively. The following transaction dating the period: % if on on account, P250,000 lections of sales on account, P220,00Q able and allowance P120,000 and s occurred22 Sh, y of P30,000 accounts receivable Was ¢ The collectabilit My be NNN ie receivable were deemed worthless, ; re ea usly written off satis receivable ea. 78) ot included in the collect Way subsequently collected (n' ions abet Requirements: are the journal entries (use the ‘allowance metho . ; Bins the ending balances of accounts Teccivabje 7 allowance for bad debts using T-accounts. ©) Determine the carrying amount of the accounts Fecevabl year-end. ‘ Estimating doubtful accounts a 5, The records of Ship Co. show the following information; Accounts receivable, Jan, 1 ; 189p Allowance for bad debts, Jan. 1 (Cr.) 1260) Sales on account 900,000 Sales returns on credit sales 90,000 Write-offs 15,800 Recoveries : 2,600 Collections, excluding recoveries 781,000 feeererint Compute for the (1) bad debts expense, (2) ending ean ne for bad debts, and (3) carrying amount of recei' . ate vable on Dec. 3] under each of the following a a : i ercentage of net credit sales (2%) Percentage of ending Teceivable (8%) 6) 6._ The followin, i Days outstan, pains to Lakland Co's accounts receivable: 0-60 Amount % uncollectible 61-99 190,000 1% 91-129 240,000 3% Over 129 30,000 a 10.000 10% ma. a aeao punts Receivable oun sin allowance for bad debts account has Lakland wrote-off P4,600 FES b during the period. : Total eginning balance of The and recovered P200 10,100. accounts irements: Compute for the (1) bad debt of allowance for bad debts, and (8) end (2) ending f accounts receivable. » ing carrying Requ palance amount oO.