RECEIVABLE IN GENERAL ALLOWANCE METHOD

a. Aging - ADA end

TRADES AND OTHER RECEIVABLES
b. Percentage of Account Receivables - ADA end
- Collectible within one year or within normal operating cycle;
c. Percentage of Sales - DAE
whichever is higher
a. Aging
Trade (current asset)
- Past due
- Ordinary / primary course of business
- % of collectible | % of uncollectible
o Claims from customers
C (%) UC (%) Receiv Uncoll ADA
Nontrade
100 WO 25k 100,000 Beg
- Other than ordinary course of business
100 5m 97,500 DAE?
o Subscription receivable – Capital or reduction subscribe 98 2 1m 20k 10,000 Recov
share capital 80 20 500k 100k 182,500 end
o Current - Suppliers 75 25 250k 62.5k
Employees (depends on the period) NRV = 6.75m - 182,500
Officers (depends on the period) ↑
Damages Required Allowance for Doubtful Accounts, end.
Silent (not stated)
Claims Recovery – previously written off Written off
o Noncurrent - Shareholders Receivables ADA
Directors ADA Receivables
Affiliates (sister company)
o Advances / Loans Allowance
DAE 97,500 ADA 25,000
Measurement at Initial recognition - Fair value + Transaction cost ADA 97,500 Receiv 25,000 – can’t be collected
Subsequent measurement - Amortized cost (intangible asset)
Recovery 10,000
---
ADA 10,000
Net Realizable Value
Recei. – Allow. for UA / ADA
Short-term Receivables – Face value b. Percentage of Account Receivables
Long-term Receivable with interest - Face value (P+I=MV)
Long-term receivable without interest - Present value (P+1=MV) A/R ADA
Beg Collection Write off Beg
METHODS IN COMPUTING NRV Credit Sales Write off DAE
Recovery Sales R&A Recovery
DIRECT WRITE-OFF METHOD Sales D
- Proven that there is worthless 100% End ADA, end
Bad debts expenses
Receivable End of A/R x % = ADA, end.
c. Percentage of Sales B. 1% of GS = 50,000 DAE
Basis ADA
1. Gross Sales – not adjusted WO 20,000 Beg DAE 50,000
2. Net Sales - (GS-R&A – D) 50,000 DAE ADA 50,000
3. Credit Sales - (GS x % on account) | sales on account Recov
4. Net Credit Sales - (GS – R&A – D x % on account) 70,000 end

% x Basis = DAE ADA C. Aging – uncollectible ₱80,000 = ADA, end

Write off Beg ADA
DAE WO 20,000 Beg DAE 60,000
Recovery 60,000 DAE? ADA 60,000
Recov
ADA, end ? 80,000 end

D. 10% of A/R = 50,000 ADA, end

PROBLEM
ADA
WO 20,000 Beg DAE 30,000
Valix 5-1 Page 150 Requirement 30,000 DAE? ADA 30,000
1. DAE Recov
A/R 500k 2. ADA, end 50,000 end
NR 200k
ADA 20k a. 75% of all sales are credit
PROBLEM
Sales 5m 2% CS – uncollectible
Problem 4-1 Valix Page 127
SR&A 30k b. 1% of GS
SD 20k c. Aging – uncollectible ₱80,000 Trade NT-NC
d. 10% of A/R Receivable 2m - Trade A/R 775,000 /
ADA 50k Trade NR 100,000 /
Installment receivable 300,000 /
A.
Customer credit (30,000) Current liab
75% of all sales are credit = 3,750,000 credit sales
Advances - supplies 150,000 /
2% CS – uncollectible = 75,000 DAE Customer credit (20,000) Current liab
Advance – subsidiary 400,000 /
ADA Claim - insurance 15,000 / nt
WO 20,000 Beg Sub. Recei due 60days 300,000 / nt
75,000 DAE Accrued interest recei 10,000 /
Recov
95,000 end Entry:
Advances - Subsidiary 400,000
DAE 75,000 AP 50,000
ADA 75,000 Receivables 350,000
 PROBLEM RECEIVABLE FINANCING
Problem 4-2 Valix Page 128 - company is in financial risk
- receivable as collateral
AR
Beg 600,000 Collection 5,300,000 Forms
Charge Sales 6,000,000 Write off 35,000 1. Pledge
Shareholder subscriptio 200,000 Merchandise returns 40,000 o whole or all portion of receivable as collateral
Deposit on contract 120,000 Allowance-shipping dmg 25,000 2. Assignment
Claim – damages 100,000 Collection – claims 40,000 o only specific portion of receivable as collateral
IOU 10,000 Collection - subscription 50,000 3. Factoring
Cash advances - affiliat 100,000 o sales
Advances - suppliers 50,000 o use as collateral at the same time sold the account
end 1,690,000 4. Note receivable discount

1. AR = PLEDGE
2. Entry = - No entry would be necessary
3. Trade and other (current) = - It is sufficient that disclosure is made in a note to financial statement
4. Classification =
ASSIGNMENT
1. AR With recourse – if customer don’t pay, entitled to pay
AR Without recourse – no liability
Beg 600,000 5,300,000 Collection Notification – customer → bank
Charge Sales 6,000,000 35,000 Write off Nonnotification – customer → company → bank
40,000 Returns
25,000 Allowance Assigned A/R Set-up NP
End 120,000 A/R – assigned 3m Cash 2.5m
A/R 3m NP 2.5m

Collection
Cash 2m 750k
A/R – assigned 2m 750k

Payment (Principal & Interest)

NP 1.9m 600k
IE/IP 100k 50k
Cash 2m 650k

Return to General A/R

A/R 250k
A/R – assigned 250k nonnotification
 FACTORING Note Receivable Discount
- receivable from factor → bank, financial institution - there is corresponding due date
- factor holdback = allowance
o sales, discount, write off To get Interest I = Principal x Rate x Time (I=Prt)

1,000,000 Receivables Cash 750,000 Maturity Value = P + I

50,000 5% service charge Receivable 200,000 Discount = MV x R x T ← hasn’t expired (days / 360) | R = 2nd
200,000 20% factor holdback SC / Loss 50k Net Proceeds = MV – Discount
750,000 Proceeds A/R 1m
Accrued Interest = Prt ← expired period (days / 360)
Loss on Factoring: Carrying value = Principal + Accrued Interest
Proceed – Total amount of receivable Gain or Loss = Net Proceeds – Carrying value

10,000 Return Sale Return 10,000 PROBLEM

25,000 Write off ADA 25,000 Problem 9-8 Valix Page 279
35,000 Recei. from factor 35,000
P = 500,000
Cash 165,000 R = 8% R = 10%
Receivable from factor 165,000 T = 1 year T = 6 months

PROBLEM Principal 500,000 Principal 500,000

Problem 8-9 Valix Page 252 Interest 40,000 Accrued I 20,000
MV 540,000 Carrying A 520,000
July 1 800,000 of A/R w/o recourse, notification Discount (27,000)
Factory fee 5% of A/R factored Net Proceeds 513,000 Loss 7,000
Withheld 10% of A/R factored
15 Fully collected less sales R&A 20,000 PROBLEM
31 Final settlement Problem 9-8 Valix Page 279

A/R 800,000 Cash 680,000 P = 2,000,000

Fee 40,000 Receivable 80,000 R= R = 10%
Withheld 80,000 Loss 40,000 T = 8 months T = 2 months
Proceeds 680,000 A/R 800,000
Principal 2,000,000 Principal 2,000,000
Receivables 800,000 Cash 60,000 Interest - Accrued I -
Return 20,000 Sales R&A 20,000 MV 2,000,000 Carrying A 2,000,000
Adjusted 60,000 A/R 80,000 Discount (100,000)
Net Proceeds 1,900,000 Loss 100,000
 PROBLEM Margin / Mark-up
Problem 9-11 Valix Page 280 Based on Cost or Sale

P = 6,000,000 COST SALE

R = 10% R = 12% S 140% 100%
T = 6/12 T = 2 months C 40% 60%
GP 40% 40%
Principal 6,000,000 Principal 6,000,000
FG 40% Profit on Sales
Interest 300,000 Accrued I 100,000 400,000 selling price
MV 6,300,000 Carrying A 6,100,000
Discount (252,000) Sales 400,000 Sales 400,000
Net Proceeds 6,048,000 Loss 52,000 Cost 240,000 Cost 285,000
GP 160,000 GP 115,000
INVENTORIES
Service type - supplies NS/NI NS + Ratio
Merchandise type - materials inventory
Manufacturing type - raw materials finished goods Goods held on consignment - consignee (tayo may hawak – not ours)
work in progress factory goods Goods out on consignment - consignor (tayo ang owner)

Legal test “ownership” Problems:

“title” Problem 10-1 Valix Page 303
Exercise 2-2 Ocampo Page 2-27
FOB shipping point – buyer
FOB destination – seller

Consignment – consignor (owner)

consignee (display) sm

1. Goods owned and on hand

2. Goods in transit and sold FOB destination
3. Goods in transit and purchased FOB shipping point
4. Goods out on consignment to consignee
5. Goods in the hands of salesmen or agents
6. Goods held by customers on approval or on trial

SYSTEM TO RECORD INVENTORY

Periodic – physical count
Perpetual – Stock card
MI | COGS