Solutions: Audit of Receivables AP - 06 - ACCTG 100c - (Second Semester 2012-2013)

Problem I
1 Inventory 92,000
A/R 92,000

2 Sales 40,000
A/R 40,000

3 Cash 124,000
A/R 124,000

2 Balance before adjustments 2,020,000

AJE 1 (92,000)
AJE 2 (40,000)
AJE 3 (124,000)
Adjusted balance 1,764,000

Problem II
1 NR from sale of division 4,500,000
Less: Payment on May 1, 2012 (1,500,000)
Installment due on May 1, 2013 (1,500,000) 1,500,000

NR from officers due 12/31/14 1,200,000

NR from sale of patent due April 1, 2014

Present value of note on April 1, 2012 (P400K x 0.797) 318,800
Amortization April 1 to December 31, 2012 (P318,800 x 12% x 9/12) 28,692 347,492

NR from sale of land 280,000

Installment due on July 1, 2013 90,250
Interest (P280K x 11%) (30,800) 59,450 220,550
TOTAL B 3,268,042

2 Note receivable from sale of division 1,500,000

Note receivable from sale of land 59,450
TOTAL D 1,559,450

3 Note receivable from sale of division

From May 1 to December 31, 2012 (P3M x 9% x 8/12) 180,000

Note receivable from sale of land

From July 1 to December 31, 2012 (P280K x 11% 6/12) 15,400
TOTAL A 195,400

4 Note receivable from sale of division

From January 1 to April 30, 2012 (P4.5M x 9% x 4/12) 135,000
From May 1 to December 31, 2012 (P3M x 9% x 8/12) 180,000 315,000

Note receivable from officer (P1.2M x 8%) 96,000

Note receivable from sale of patent (Number 1) 28,692
Note receivable from sale of land (Number 3) 15,400
TOTAL A 455,092

5 Unamortized discount, April 1, 2012 (P400,000 - P318,800) 81,200

Amortization, April 1 to December 31, 2012 (Number 1) (28,692)
TOTAL D 52,508

Problem III
1 A Allowance for doubtful accounts, Janury 1, 2012 300,000
Provisions during the year 150,000
Writeoff during the year (187,500)
Recovery of writeoff 50,000
Balance before aging 312,500
Required allowance 200,000
Overallowance 112,500

Doubtful accounts expense (P150,000 - P112,500) 37,500

 B Accounts receivable, December 31, 2012 2,375,000
Allowance for Doubtful accounts (200,000)
Net realizable value 2,175,000

C Equal to overallowance 112,500

D Allowance for Doubtful Accounts 112,500

Doubtful Accounts Expense 112,500

2 A Base on provision during the year. 150,000

B Allowance for doubtful accounts, Janury 1, 2012 300,000

Provisions during the year 150,000
Writeoff during the year (187,500)
Recovery of writeoff 50,000
Allowance for doubtful accounts, December 31, 2012 312,500

3 A Required allowance (8% x P2,375,000) 190,000

Allowance for doubtful accounts, Janury 1, 2012 300,000
Provisions during the year 150,000
Writeoff during the year (187,500)
Recovery of writeoff 50,000 312,500
Over allowance 122,500

Provisions during the year 150,000

Over allowance 122,500
Doubtful accounts expense during the year 27,500

Problem IV
Net Debit Adjusted Required
1 Balance Adjustment Balance Rate Allowance
60 days and under 258,513 258,513 1% 2,585
61 - 90 days 204,735 7,260 211,995 3% 6,360
91 - 120 days 59,886 (4,110) 55,776 6% 3,347
Over 120 days 35,466 (6,300) 29,166 25% 7,292
558,600 (3,150) 555,450 1. B 19,583
2. B

3 Allowance, January 1, 2012 13,125

Writeoff, November 30 (4,110)
Additional writeoff (6,300)
Balance before any provision 2,715
Required balance per aging 19,583
Doubtful accounts expense for 2012 B 16,868

4 Provision during the year 27,930

Doubtful accounts expense for the year 16,868
Credit adjustment 11,062
Debit adjustment for correction of error in recording writeoff (4,110)
Net credit adjustment A 6,952

Problem V
1 Total 0 - 30 31 - 60 61 - 90 91 - 120 Over 120
AAA 140,720 56,000 84,720
BBB 83,680 48,000 35,680
CCC 122,400 80,000 42,400
DDD 180,560 92,560 88,000
EEE 126,400 126,400
FFF 69,600 69,600
TOTAL 723,360 262,400 177,280 130,400 117,600 35,680
Percentage 1% 1.50% 3% 10% 50%
C 38,795 2,624 2,659 3,912 11,760 17,840

2 Doubtful accounts expense 24,795

Allowance for Doubtful accounts 24,795