bee to 1st ae sw ee ie Ofte ReSA ‘The Review School of Accountancy ‘@ Tel, Nos, 734-3989 / 735-9807 PRACTICAL ACCOUNTING 1 C. Uberita/C. Esponilla/G. Macariola Cash & Cash Equivale: Chocking account wt Morgane Bank, P(20,000).Chccking account at Land Bank, 500.000; Puyroll account Narioaal bank, P100.000; Foreign bank seewnunt-ystistal, P 780,001 Postage stamps, P 22,000; Exiplyses peostdated checks, P 30,000; 10.1. roy president's broiler, 75,000: Traveler's chek PS0,000%; Nos Finds check, PION, Petty cash fi Cashier sche, P36,000 ‘Whit sth como gb balance to he reported inthe halance sheet of Hipion Company on Ds. 3.20123 a. PSK2.000 ‘© P7000 . b. Poko.00 Prono 3 2.) The easly account in the current asset section of the blues sige for Heater Company showed 3 balance 0 P5800. Ha ound jaa the Flowing ie Peay cash fund (PLIOD. isin the form of pakswuchers). FS,00): Checking acct balance, duchan (A 72840 chest ain ousssdngh 7255900 Unaroried Hesee eeatng » Ee Shook for F000).120000; Curenckes ant cons avaiimg deposit, PSS; Hoy sinking Kind cash / FH Check dra by mana rete by bank marked NS X onan woah, Wha is the corrvet cash balance foe Heater Company's bak PAOLO re 430,000 by. Pav.on0 a pS29.0000 nin. Certificate of deposit, ¢suauths. 10%, due April 20. 2015, PB0.000: Money 1 Senifieate) current rate, 9.79%, PAQ,OO: Payroll yecout, P20.000; Certticae of deposit. Lmuanth Fobriury 15, 2015, 1775.000 sand Petty cash, B1.500, What show fe the tlance to be reported as “Cs ¢ 10" ln the Decesnbcr 31.2014 statement of financial position of Delta Corporat 2 PIs9.sH0 © P214,500 bh Pi99.s00 P74 500 ae 4. On December 31. 2014, Fist Company had the following cash balances: co ‘Cas in banks _ PLani.000 is Petty cash fds (all fimds werggelasbuesed on 12/3114) soja |S ‘Cash in hanks igedded 600,000 in separate bark wherein te co average of PROM OOUTDE 10 workings on a gina Sans. tm the current as ‘Shout be shown ss cash & 1200000 , PI.s00.000 b. P1280,000 4d, PILSS0.000 is requir i section of Fira’s December 41, 2014 statement oF Financial posi Ren cutigg bats — means vorataed A enitiecenber 31, 2014, tettesting Company ns he Glowing gnpostit of ty ch ad ih equivalent Demand deposit, P1,500,000; Certificate of deposit-RMaaaes PSOO.0041, NSE check of custome 20,000; Money marke: placement (de dato: June 30, 2015), #1,000,000; Savings deposit in hu ‘au, PS0.000; 1OU' from an employee. P30,000, Petty cash fund, PION: Customers ehesk da January 31,2018, P60,000: Customer's check outstanding ons, 30,000, and mailed Doveniber 31, 2014, Ul The company uses the ealenay yal as ick pen until Jarmary 15, x ing which tame, P20 Meal on December 31,2014 How much “ash api ah sails ember 31,2014 hase set a L910, ELTON Sen 3104Page 2012 balance per book 7 erdetca "imber Compu provid the ning dar he papa from the ca Balance por ok z PI70.000 Outstning checks (inching cemitied check of 120,000) ox 100,000 Deposit io transit 40.000 December NSF checks (ol which 10,000 had been re-let and cleared sn December 27) 28% 30.000 rrencous enlit to Timbers aécount, representing preeevds loan granted {o other cémpany 40,000 Proceeds of note collected fy hank for Timber, peta servee charge of P$,000. 150,000) eros hank chi P3000 ‘A cteck 1 P5,000 it payne of winter "he ,corret gash balan: o.be Shown in the company's Decermber 31, 2014 statement of financial position a 335,500 335,500. b. 298,500 45.500 1 th you tod oP Glamour Compuny a of Descmnber 31,2014, wou tuthered the following: Balance per book, Prin 0 Nank chars. P1500, olan pet bank, PAOS0G, Depo It tis PIARNN cae et otc hy ks PaDS: Ic an came ee P60; Catone eek teeed NGF PSP ANI Deposton’s note shay! secs, PASUOHD. th ea ono oust? a tos ta.ou) ten a: tes000 The following iaformeition was ‘J fo the bask reconciliation for Fox Company, Assume all other 22 reconciling items are iste bel é 4 BF ‘Checks & shang rere by bagh in ie inclining Fae service charge ot PS,00,P900,000; Chesk sus $y samp for P9000 was ronda, KK: Lamecous Pk debi, PAWN: Service charge made by ok In ‘May and recorded on book in June, P10,000; Total grits wo eash in all journals during June P800,000:5 «5 Castors NS check returned asa hank charye i ype (1 entry was meson book), P1090; Customer's 8 3° Steck a Mandeep fn cts mao buh cae Mo aa PSE ‘Customer's NSF check peiumed iti Muy and recorded in Junc, 20,000; Outstandi ug checks at May 31, 200,000. Wht isthe adjusted amentof cash discret fin Suny? a. 33,100 ees © 891.200 Fi fh Reo asi00 & cier is. Opposite ‘9 The TOMO Wins information was included in the buik reconciliation of Silicon Conipany on December 31,2014 oat recorded company reecpts fr December 850,000. eicips 13 2 Cre meio for November recorded in December 60,000 0». Ley Oe etc Cred mem tye December rot yet recone 80,000 co owe) Frroncous receipt by tbe company’ during December. no corretion was ee ‘made und he following. year $0,000 Vironsous hank dishurssmest in December cored byibank ia December 18040 Depent of Sitiman Co. grsited to Silicon Company daring Deceuibor 20.000 Tosal recip per bank in Decetnbr 900.000 Deposit in tramit-December 31, 2014 00.00 ook receipt for 250.000 in Dec. recone by the company vs 5.000 | (x) ‘What i the eprrecvadjusta receipt for December? : “a 45,000 65,000 be 850,000 a. 895,000 10. Rock Coniany hud the followin bank re 4 Balance per bank statement, 03/31 "465,000 Deposit in transit P109,000 Debit meni . Ho.909 PS75,000 0,009 Balance per book, 03/31 Ps90,090 ‘Ail reconciliation items a} March 31, 2014 cigar Yhroue the haok in Apel. Outstanding checks at April 3. 2014 totale 78,000; density in iansit amounted P 150,000: Cre amen far Ape PRON, Sebo fox. ApritP15.000, LAtneavs book exciton April P1000 bu comected om the siic yah, bank recip For Ane-PH. O00 ad ag isan fi Apri 0c ss ofigath receipts b @3.000 wie enh sh 104, 0 He sare wie Shore:ReSA The Review School of Accountancy Tel. No. 735-9807 & 734-3085 PRACTICAL ACCOUNTING ee 228 © UbertaiC spent Recvivables-Lecture 1. Nature of receivables ~ Receivable represents financial asset arising from a:contractual Fight to receive cash or another financial asset from enother company. It falls under one of four categories of financial instruments, namely Loans and Receivables. Loans and Receivables are non-derivative financial assets with .fixed maturity (including. loan assets, trade receivables, investments in debt securities and deposits held by banks) that are not quoted in an active market other than those classified as “financial assets at fair value”. The reference to fixed maturity in the definition means a contractual arrangement that defines the amounts and dates of payments to the holder such as interest and-principal payments. For most entities, they comprise trade receivables, Joan assets, investments in debt instruments. For banks and similar institutions, they constitute a significant proportion of their non-trading assets, in particular loans and advances to customers. 2. Classes of receivables ‘Trade receivables ~ are claims.arising from sale of merchandise or service in the ‘ordinary course of business operations; such as the following (a) accounts receivable and (b) notes receivable, Non-trade receivable ~ are claims arising from Sources other than from sale of goods and services.in the normal course of business; such as the following (a) advances to officers and employees (b) advances to subsidiaries (c) dividends and interest receivable (G) deposits as a.guarantee of performance or payment (e) deposits to cover potential damages or losses (f) claims for; insurance, tax refunds, lawsuits, merchandise damaged or lost in transit, returnable items, etc. fe . 3. Presentation of receivables on the face of the balance sheet or inthe notes Receivables are disaggregated into amounts receivable from trade customers, receivables from related parties prepayments and other amounts (PAS 1 paragraph 75b) Trade receivebies should be presented on the face of the balance sheet as one line item, and classified as current assets but the detail of which will be disclosed in the notes. Non-trade recelvables that are currently collectible should be presented as one line item under the current asset section but the detail of which will be disclosed in the notes. 4. Valuation of Loans and Receivables: . At initial recognition loans and receivables are measured at fair value (transaction price), The fair value is based on the total expected future cash inflows that an. ‘enterprise will realized. b. Subsequent to initial recognition foans and receivables are measured at amortized cost. The amortized cost of a financial assct is the amount at which the financial asset. is measured at initial recognition minus principal repayments, plus or minus principal amortization using the effective interest method of any difference between that initial amount and maturity amount and minus any reduction (directly through the use of allowance account) for impairment or uncollectibility, Accounts receivable are measured at original exchange price between the firm and the outside party, less adjustment for cash discount, sales return and allowances, yielding and approximation to fair value which is the amount expected to be collected. The issue of bad and doubt? Q Yw arise in accounting for trade receivables. There are cul }ccounting standards that deal specifically with the measuren Atul debts, the dnly guide which accountants rely on in practit® IS" BUGETICe consideration of PAS 1, which generally requires that known bad and doubtful debts shall be provided. for However, the application of this prudence consideration on accounting for trade GUAM te wean us ee n accountingeet __ Receivables (Lecture) 7 on the direct write-off method, where bad debts expense is recognized or recoided in tne period in which itis determined that a Specie trade receivable cannct be collected. Ths, view that each sale results in a “Good trade receivable and accordingly, the full amount shall be recognized in the period of sale. In ather words, no allowance shall be made in respect of that “good” trade receivable. When iater events proved that certain receivables are uncollectible ind are worthless, 3 direct write-off = made to recognize the bad debts. from a practical standpoint, this method has been argued as simple and convenient to inply. Furthermore, the amount written off is based on actual facts rather than stimates. which may need revisions subsequently when facts become known. However, the direct write off metnod ls theoretically devicient because it usually does not match costs with revenues of the period. This is due to the. fact that trade fecelvables do not generally become worthless at an identifiable moment of time. AS Such, the method does not result in trade receivables being stated a the estimated eallzable value on the balance shoet KeSA/PRACTICAL ACCOUNTING 1 One view of doubtful debt is In practice today, the view that is generally accepted is that bad and doubtful debts shall be provided immediately when they are known. This is in accordance with the’ prudence principle which requires that when the collectability of trade receivables is considered doubtful, edequate allowance shall be made. Notes receivable should be stated at present value. The present value of a note receivable maybe its face value (for notes that are short-term and interest bearing long-term notes) or discounted value (for long-term non-interest bearing and long- term interest bearing but the interest rate is unreasonably low) A note receivable is said to be interest bearing when a specific interest rate is stated in the promissory note. The stated rate is the “nominal or face rate or coupon rate or contracted rate as part of the note which usually corresponds to the market rate of interest of similar risk. The market interest rate or effective interest rate or yield rate is the rate used in the market to determine the value of the note, which is actually the discount rate to determine present value. When the stated and market rates are equal it means the notes were selling at face but when the stated and market rates are different it means thot the face of the note is differs from the present value of the note. The difference would either be a discount or premium that is to,be amortized over the term of the note using the effective interest method as prescribed by the standard for financial instruments. A note Is said to be non-interest bearing when there Is no specific stated interest rate. The interest rate is already imbedded in the tace of the note and consequently the maturity value of a note Is its face amount, therefore, it is necessary to separate the interest from the note by discounting the note using the prevailing market interest rate. - Impairment of Loans and Receivabie: Assessment and recording of impairment loss - An entity shall.assess at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are considered, if and only if: (a) there is objective evidence of impairment es @ result of one or more events (loss events) that occurred after initial recognition, and (b) that the event (loss event) has an impact on the estimated future: cash flows of the financial assets that can be reliably estimated It may not be possible to identify a single discrete event that caused the impairment The combined effect of several events that could have caused the impairment should be considered. Losses expected as a result of future events, no matter how likely, are not recognized. Objective evidence that 2 financial asset or group of financial assets such as receivables is impaired includes observable date that come to the attention of the hol of the financial asset about the following loss events: 2. Significant financial difficulty of the debtor, issuer or obligor. b. Default or delinquency in interest or principal payments. . The creditor granting the debtor-a.concession that the creditor would not otherwise consider. QUNTING 1 d. Probability that the borrower will enter bankruptcy or other financial reorganization cr restructuring. e. Disappearance of an active market for that financial asset because of financial difficulties, f. Indication that there is a measurable decrease in the estimated future cash flows from the group of financial assets including: 1, Adverse changes in the payment status of the borrower in the group (e, 9. Increase number of delayed payments. 2. National or local economic conditions that correlate with difficulties on the assets in the group (example, increase in the unemployment rate, decrease in proper price for mortgages in the relevant areas, adverse changes in industry conditions affect the borrower in the group), It there is objective evidence that the recetvables are impaired an impairment loss should:be recognized. The amount of the loss is the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The carrying amount of the receivables shall De reduced either directly or through use of an allowance account and the amount of the loss shall be recognized in profit or loss. Transfer of receivables: Pledging of Account receivable 1. Continue to recognize and report the receivable with appropriate disclosure. 2. Recognize the proceeds as a liability rather than es income 3. Charge interest on the carrying value of the liability b. Assignment of Account receivable 1, Transfer the account receivable to account receivable assigned 2. Recognized the proceeds as a liability and charge interest on the carrying value of the liability 3, Changes in the value of the assigned receivable such as, returns, write-offs and collections with-in oF after the discount period are accounted the usual way with a corresponding credit to the account “Account Receivable Assigned”, 4. Any balance in the Account Receivable Assigned Is reported and classified in the same manner for outstanding account receivables. ¢. Factoring of Accounts receivable The receivables are sold to a factor, which then collects the cash from the customers. The factor makes a profit either by charging a fee, charging interest, or by paying below face value for the receivables. The company selling its receivables is nearly always referred to as the seller, even if the receivables: have not been sold in the eyes of accounting theory. Typical arrangement might include the following terms: 1. The seller will assign (sell) some or all of its receivables to the factor. 2. The factor will then advance a percentage of the amount factored. The amount advanced will typically be about 70% - 90% of the face value of the receivables. 3. The factor can be repaid in a number of way: a. The factor may collect in all the cash from the customers, and then pass on the balance to the seller (less any charges). b. The seller may repay the advance after a specified period of time (plus any charges). 4. The factor may charge the seller a fee based upon the length of time that it takes. to collect in the receivables. 5. Receivables may be factored with recourse (hybrid method) or without recourse (continuing agreement method). a. With recourse means that the seller has to reimburse the factor for any unpaid receivables. Sometimes this is limited to a fixed amount. b. Without recourse means that the factor bears the cost of unpaid receivables. There will obviously be a higher charge far this service to compensate the factor for the higher ris’—*-"=~ 6. The factor may also adv, Mor a separate fee. This will have no effect on the accounthDvD * ® ReSA : The Review School of Accountancy ‘ ‘Tel. No. 735-9807 & 734-3989 PRACTICAL ACCOUNTING 1 C. Ubwrta/C. Eapenily/G. Macariole Loans and Receivables count of G Cémpany shows a debit balance of PS.950,000, . Accounts receivable, LT2SU Notes receivable, ELOU.000; Installments receivable, normally duc 1 year 4 poet eee ies eek montreal ote nn a i Rr Se sale cap ta b. 1.125.006 140.000 win Oe Ste 1, “On December 31, 2014, the “Receivables” Subsidiary details show the following: ‘On January 1. 2014, ¥ Company’ rade Lovns and Réceivable has an outstanding balance of PS00.000, Below fare the transictions im ify Trade Tots and Receivables and other telated accounts hing 201 4 ah sia Ses inhi» 00.00 saes-PATO OU; Aesount recive wren, 30.00: Prcases tai poo: Pmsts ce MANNS: Pchce dco S20000; Taal Sal om 50,000 of | od from eredit customers, P4,900,000; Sales di - #500, 000: ash 30k Of notes, ‘on moles receivable including interest of P10,000, ph hie Provision for fre urns ana discos on uaa eccvabls, 725.000, What i he suring cot the Loans and Receivable on Deceraber 31,2142 AR aS & P2A15.000 - 3 pol yen] soe ee aiti0.000 Seen CD (202) (e428) = 24806 Se Mould Cope eho teas on tes fT, 30 Mou ono, cah sis bet axed om Bal py expe ‘eastomers take aeamtage of the aliseent ables balances at December 31, 3014 Baise aye b recording sales ane tnuke receivables. An analysis of Moulds trade re revealed the following: > Age Amount Colectibitity 30 pasa Abie ctlts — goeic0e a get © 259,00 pT 16-304ays 180,000 98 = 18800 we | Seon days 15,000 4m = 13,500 ‘Over 60 days 500 1.300 t P52 500 AR ene! ai on, seat amount should Mould report for uestion JW December 31, 2044 statement of financial po Pau «PSRs b) PAR coqnok2 2k s02 = o,0m ! Pom Quest ape isthe amortized cas of the receivable on December 31, 2014? a. PARA © P493,000, b. Pak6,000 PAg9, S00 4. Megabank granted an 8%, 3-yeue P6,000.060 loan to Global Company on funary 1. 2013. The interest on the foun is puyable every December 31, Megabank incurred 11148, 22 of dirt origination eost but any origin, fee of P301,000 was changes against Global Company. The elctive rats the Yon ay rea of he origination fog and costs now Pe dames isthe gated ofthe Ia on scene 1-204 jn Megan's accoting Bhs? a, PS848,122 — rev 3a 1,20 TE PS,944,054 b, P5,894.453. Jor |, ac14 db P6,000,000; 3105 tion 2/Whut amount of faterest ing should Mewahank disclose in its December 31 2014? a PSDM3t Due Pas of ‘i b ws30.300 o wo ey ees “fe 2d = §30,00 (aoe — (Cee Re K-94 4H KLIN -GWE = 6449 ISF OFFE —_____Loans and receivabte ‘Wallington Corp bas outstanding ing P63 wlllion as of December 31 and sales on credit daring the yeae oF P24 millon. Thote is ulso 0 rei balance of PI2,000 in the allowance for Joubefl ‘ecounts. If the company estimates that ¥9e of is cutstancing pssivables wil be uncollctible, what will be the monn of bad debt expense reeagized fo , PSO8,0040 «, P5300 65M x82 > 520/00 Atend a Pig20.000 are a 20000 “12 coo = SVCD, December 31, 2018. Ming. Company had accounts receivable of 1540.00, wee dedcting the s. During 2015, the company had charges lob dt expense oT POD;000 and Stef, as aneolcctble Bes ee eae pany reer on sre fama poston a Dever, 015, a5 agssuts oases a tans ir dubinboccsis? area a. Pato 00 «. S9n.000 & e Foe 1490.00 4 Po40.000 eQ ene’, acd S& he clove of i fit sro ral pays a finance fee of (%6 on the kansaetion upfront, What would be resorted ioe the transier of receivables : a. now ©. lows oP 16,000 b. loss of P20,000 1 loss of P180,000 gen err 0. an ie. cat Dcamotariig betes «the mote was 1085. Dating December, Peer gollesad 1248,000 om assigned accounts fled deducting PS.000 ‘fiiscouats, Pele Company accepted returns worth P1000 and wrote oftasigned accSuns otaling 9,000. ‘What amoun dle show! Paul Company, coniines to diselose in its December 31, 2014 statement of AA nant ps me a wone «. PR36.000 he P7SI,000 dro. |e Seo ae b Sie ine foto 72,000,000 of is wicountswcetvablos wit Th fnane company Fins apourt ea ‘wcll ad ey San na gin (ss) onthe wun of recivabex i 2 Lows of P 100,000 «dot oF 200000 on is sain of PHOMOGO 4. low oF P3000. Senos = CM Pratl * / sp Lae ke ‘Sum Inc, factors, 2,000,000 of its accounts receiv ables avith se (recourse) tor a finance charge of 3%. PT ere ee on tee mee. ae would be recorded as as) on the bans a ecevables owe ie bn of 60008 I 1 uin of 60.000 3 of P2600) E fests (21 292-2000) SA B ee discounted at the bank a customer's 600,100, 6-monsh, 10% note Me Niet Aus201 Theo smth te 12s Sh Clr Company eeopate. the pause asemmng the thao Geer CUMEKIC x Ye) «P1260 = Ghee + 506 @ et7.400 = aoe eee yican oo apy SE © 1630.000 Dhc. Grex oie b. F200 eel 4. 130.000 ~ ww Keath) Bey Prneacen e “25-202 Gos CFE 1 2014, ance Coney ld GING Mic Company. Mobis sind uname ae requiring payment of P60,000,annmually every December 31 for sven years. The prevailing, this 9pe oF woke athe die sesnance was (0%, Infection on present value Fotos is as follows Fv 429/000 by. eo 292 os Present valu or Ordinary if v2 Periods otal Io wwivortaios P 2AZI8S | ae 0.5647 433526 Sale 292, (0 ‘ s asI3is Kosa? 3105 &/ ‘What should be tie amortized vost of the receivable vs Dygcunbyee 33.2 Ae etd rage 20) E Seen &) FY C420K ~L0K) 260,00 Ba ig do! Tan 1,204 Q pee Ca Sis-29 Na eA) 7 ua Nines Prey sour = HE 252 "Brel NOISE SEG RIITIIOS 54 Soene 202, )0S x1 * Zul dM Bed Hitred cow X4o5c% = 242 PWR SAANLAC 13. On December 31. 2014, Dwarf Comporaiton sold Tor PA80,000 an old machine having an original cost of PROO,000 and a hock vale of P600,000, the term ofthe sale were as follows: arom P120,000 down payment eae san 202 15) 120,000 payable on December cach of the next sbEee-years gene G23 485 ww Wor 00, The agreement of sake made mo mention of iment However, 96 would Be a fair eal Kor this Tae Ge Cae 4c) ees aan Gnvestion £ What isthe amount o fons trom the sale of the machi a P1600 ‘e, P200,000 b. Pite24s 1d. 0296245 i, 2 BS © Oestion p/Avha should be the sored coat of the note reevable on Dscember 31, 20157 Bw SH os, fo92 oe , P203,755 CES (20m asrxnl 2 308) 11,093 d. P360,000 Bie A. on December 31.2015, Ball Company finished consultation services and accepted in exchange a promissory ‘S note Wilh a Tace valve of #200,000, a duc date of December 31, 2018, and a stated rate of 586. Wy receivable at the end of each yeu? The Tair value of the yervices is nol readily Geterminabe and the now i not Telly mgrketable Under the-eircumstances the note is considered to have an appropriate impute rate of onl) interest 1M Plog Moe WR Bsn sowing ante aso are prewied Douek ASSL ~ 15D OBA ge Sle ge WK EAL > 28 HF ee Toterest Rate seu Bs 33 © a opt s% 0s «st 1.15763 133100 ase 25132 { et? Fiature v A feo dott Present value of orinary anit’ 27. DANS ue of ordinary annuity of 1 319250 3.31000 What isthe ye note on December 31.2017? a oe a PIS IST 0%, Bi 2018 AIT 90909 pone Homes. Hee Ato E bh PIRQO8S - Dee, 81, 20% «t P200,000 se soicts eal actrees cae Sa ee ite Naas a dey egetacienee lpr A ee ee aapaupiiea ial tote arian rate aL Copan 8 oe ee Ne ey (ore reoray Cans Sse amie sist pee cas ee | ai aa od ya A er SHG Cg a te Safad al afd P3000 tat fs te A Comp At tine Se tssuere aes en penne | Sar ee ere sore a a etn | Wha aa sol Os its Deane 2014 til pnt he mortized ‘the receivable? wre nO Sot Sree Cons) ais: ae 1380 Set ie 2S bh P230.8H0 a i he i ‘oF P400,000 that bus been outstanding for 284.210 ' p Wilt umount of ted dbimpuinic Jase should (den Company raognize related 10 its account & od oe “ oT oe es © PIG NRE ponmNe aa te gave 27069 pists Mu iae «OG 2 IE = 120,04 fee ae FAO BU o TT Company clits avery he P30 to Mallon Jy 2.21 ary ie ing an interest rate or 12% for the full amount. On December 31, ie sed on bas Macwell'sqvcent financial crisis there's a delay and changin the pattern of collection. The delay and! change = 3% 2° i jn the patter shows that P150,004 will be duc on December 31, 2016 und P#0,000 will be due on December Bane x 08 GYS Bo : What amount recognize on Dyssuuber 31,2013? none © P106,000) b. PIO2,300 4 P138.296 o Vw oy EU Bde + GONE DL) 326/980 6 © wee 2 )atfeets Per, bash ome ae nee wt ee (0K 4 647! othe Review School of Account Ant J Rowe 84 NG, aa (0 Aosthe newiew Sehoot ot accountancy ANS Cg iment Joss should Maxwell ConyThe Review S¢ | of Accountancy Tel. No. 735-9807 & 734-3989 _______Conrad_9. Uberito bs |. Deftuition of inventories these are assets that are 1 ifeld for sale inthe normal course of business, oF b Inthe provess of production for such sale,or © In the form of materials oF supplies to be comsunmed in the production pracess or ithe rendering of services 2. Classification of inventories 1 Merchandising business handive inventory or {ventory — goods purchased by a trading company for resale in the enterprise's ordinary course of busines > b. Manufacturing business: |. Raw materials inventory tangible 2deds purchased for direct use in the manufacture of goods forsale 2 Workin process inyeriory - manufactured items requiring further processing 3. Finished voods inventory ~ manufactured goods completed and ready forsale 4. Manotacturing supplies inventory ~ ems purchased for indirect use in the manufacture of gocds for ste © Service provider business 1. Work in process inventory = the cost of the Service 3. Measurement of inventories ; ‘A. Initial measurement ~ inventories cre initially measured at hiftorial cost. The cost of inventories should include al-eosts of purchase, costs af couxersion ond other Losis incurred in bringing the inventories ‘hit present lasin. and condition Note Res aoe [facvccabic 1 Cost of purchase includes the pufohase price, jmporr duties snd other taxes (other than those subsequent!y rscoverable hy the enterprise fom the laxing siwhoritie), and transport, handling, and costs diecly atwibutbls 10 the acquisition of fined goots. metals and services, Trade + -iscounts tebates and other sii items are deduct in setsemining the cost of purchase ‘Cost of conversion es coss directly related to dhe unuls af production, sich a direct bor and {ystematic allocation of fixed and variable production overheads that are incurred i the production process. iy 3. Cost of agricultural produce harvested from biological assets - arc measured on intial cognition 1 thet fair value ess estimated post a ul sats the pin: ot harysst 4. Cost of inventories of a service provider: the labor and dire} engagsal in providing tie sence, including supervisory personnel and atributable overhead costexcludin any ‘oft margins or non-ttribuk © Nerheads . ‘The following are sxchudes fron the cost of inventories. 2. Abnormal smourt of wasted materi. for, oF ater praducion costs th _Slornge cou, unless these cots ate paces nthe proiction process prior to funer probation sage ake ‘Administrative averhsals that do not eoniibule to bringing inventories to their present location and condition, and : $ a, Selling costs /2'-tiloutin, CoM Meus ESP> ECC -~ Eo2S {Balance sheet measurement-siould he mesure atthe lower of cost or net realizable vale. The net realizable value ts the net selling pos in the egurse of the business les) the estimated cast of umplction ‘ond the estimates casts necessary to iyake the < fichiers. ortten ayn 10 net realizable fulue om an individual busi Inv soins cases, however may be appeoprite 10 group sella oe related items that sai be properly valyed en ager Bei Wichartee dag ‘Materials aind oJhes supplies held for use in the production of inventories are ten down helav cost if the finished products which they will be Incorporated are eypscted 10 be sold af cost or above cos Mowever, when a decline jn.the price of materials indicates thatthe east oF the finished prodacts exceeds ‘pet ciliable value. the maicrials-are writen down to.net realizable value. In such etfeurstances, the ‘eplacement cost of the materials may be the bsst asailable Sucasure-of theit net realizable value. (PAS 2 ar 32) r SUSE EO) TESS = eerloapeer Wher an item of awentors has bee! heable value, and ifn swbseanent blancs whet period the somme item of bwert fessment of wet reliable Yedae ald. maile. If there #0 vheur evidence of EMRE HTM FEAT ails value because of change in economic