Trade & Other receivables:

Trade receivables – receivables from clients (AR or NR)

Other receivables – non-trade receivable collectible within a year
- Subscriptions receivable, advances to employees, advances to suppliers,
- Accrued revenues (interest, dividends, commission, etc.)

Initial recognition: Face amount or invoice price

Subsequent: NRV
Gross Receivables xx
Less: allowances (xx)
NRV xx

Allowance for Doubtful Accounts:

Income statement approach - % of Sales = Doubtful accounts expense
Balance sheet approach - AR = Required ending allowance
- % of AR
- Aging of AR

Notes Receivable:
Initial Subsequent
Short-term: Interest bearing FA FA
Non-interest bearing FA FA

Long-term: Interest bearing

(SR = ER) FA FA
(SR < ER) PV Amortized cost
Non-interest bearing PV Amortized cost

PV if payable lumpsum: PV of NP - payable lumpsum & interest payable annually

Face Amount xx Prin x PV1 xx
Multiply by PV1 Int. x A1 xx
PV/ Initial CA xx PV/CA xx

PV if payable on Installment:
Annual Payment xx
Multiply A1
PV / Initial CA xx

Loans Receivable:
Initial: PV or Initial cash outflow
Subsequent: Amortized cost
Interest income: CA x ER

Receivable Financing:
Pledging - using receivables as collateral to a loan - continue to recognized the asset
and liability related to the loans; no recognition for gain or loss
Assignment- using receivables as collateral to a loan - continue to recognized the asset
and liability related to the loans; no recognition for gain or loss
Discounting: With recourse - loan agreement, recog. A & L
 Without recourse - sale agreement, dercognized the asset and recognized
gain or loss on sale.
Factoring: Without recourse - sale agreement, dercognized the asset and recognized
With recourse - loan agreement, recog. A & L
P-1
Trade & Other receivables
Trade receivables – receivables from clients (AR or NR)
Other receivables – non-trade receivable collectible within a year
- Subscriptions receivable, advances to employees, advances to suppliers,
- Accrued revenues (interest, dividends, commission, etc.)

FS 12/31/20 2021 2022 & AFTER

CURRENT NC
Trade accounts receivables 800,000
Trade noted receivables 200,000
Advances payments for purchase of merchandise 150,000
Claim from insurance company 30,000
Subscription receivables due in 60 days 150,000
Accrued interest receivables 90,000
Allowance for Doubtful accounts -60,000
Trade and other receivables (net) 1,360,000

P -2
Allowance for Doubtful Accounts

Income Statement approach - % of Sales = Doubtful accounts expense

Balance sheet approach - AR = Required ending allowance
- % of AR
- Aging of AR
1. C
Trade accounts receivable (current) 3,440,000
Past due trade accounts 640,000
Notes receivable dishonored 240,000
Consignment goods already sold (P160,000 x 90%) 144,000
Adjusted trade receivables 4,464,000

2. B
Adjusted trade receivables 4,464,000
Less due from consignee -144,000
Basis of allowance for doubtful accounts 4,320,000
Bad debt rate 5%
Required allowance for doubtful
doubtfulaccounts
accounts 216,000

ADA
Dr Allow; Cr AR Write off 128,000 80,000 beg.
0 Recovery Dr AR; Cr Allow / Dr Cash; Cr AR
264,000 D.A. expense Dr DAE; Cr Allow
128,000 344,000 Credit
-128,000 Less debit
216,000 Ending/Required allowance
3. B
Required allowance for doubtful accounts 216,000
Add write-off of uncollectible accounts 128,000
Total 344,000
Less allowance account before adjustment -80,000
Doubtful accounts expense 264,000

P-3
Gross receivable 1,085,000
Less: Allowance for D.A. 110,000
Allowance for sales returns 50,000 -160,000
Net realizable value 925,000

AR
beg. 850,000 80,000 Sales return Dr SRA; Cr AR
Dr AR; Cr Sales Cr. Sales 2,500,000 60,000 W/O Dr Allow; Cr AR
2,125,000 Collections Dr Cash; Cr AR
Debit 3,350,000 2,265,000
Less credit -2,265,000
end. 1,085,000

P-4
1. D 4. C
Accounts Receivable 2,000,000 Accounts Receivable 2,000,000
Past due 600,000 x 20% = 120,000 Less: Allowance for D.A. -190,000
Current 1,400,000 x 5% = 70,000 Net realizable value 1,810,000
Required allowance for Doubtful accounts 190,000

2. D ADA
Write off 100,000 60,000 Beg.
20,000 Recovery
? 210, 000 D.A. expense
290,000 Credit
-100,000 Less: Debit
190,000 Ending - required allowance

3. D AR
Beg. 1,200,000 8,720,000 Collections Dr Cash; Cr AR
Sales 10,000,000 Dr AR; Cr Allow / Dr Cash; Cr AR
Recovery 20,000 100,000 Write off Dr Allow; Cr AR
400,000 Notes receivable Dr NR; Cr AR
Debit 11,220,000 9,220,000
Less credit -9,220,000
Ending 2,000,000
Notes Receivable
Initial Subsequent
Short-term: Interest bearing FA FA
Non-interest bearing FA FA

Long-term: Interest bearing

(SR = ER) FA FA
(SR < ER) PV Amortized cost
Non-interest bearing PV Amortized cost

P-5
NR: LT (Interest bearing; SR = ER)
Initial: Face Amount
Subsequent: Face Amount - current/non-current

1. B & 3. C
Date Annual Interest Principal Carrying
Payment 11% (AP - Int) Amount
7/1/22 2,800,000 12/31/22
7/1/23 902,500 308,000 594,500 2,205,500 12/31/23
7/1/24 902,500 242,605 659,895 1,545,605 12/31/24
Current Non current
2. C
Interest Income 2023:
Jan - June (308,000 x 6/12) = 154,000
July - Dec (242,605 x 6/12) = 121,303
Total 275,303

P-6
NR: LT (Interest bearing; SR < ER )
Initial: Present Value
Subsequent: Amortized cost
Int. income: CA of notes x ER

Initial: 12/31/2023
Principal (600,000 x .75132) 450,792
Interest (30,000 x 2.48685) 74,606
Initial CA / PV 525,398

Face amount 600,000

Present value -525,398
Discount on NR 74,602

Subsequent:
CA x ER FA x SR
Date ER 10% SR 5% Amort. CA
 12/31/23 525,398
12/31/24 52,540 30,000 22,540 547,938
12/31/25 54,794 30,000 24,794 572,732
12/31/26 57273.158 30,000 27,273 600,005

P-7
NR: LT (Non-Int; lumpsum)
Initial: Present value
Subsequent: Amortized cost

1. A & 3. B
Initial:
Face Amount 600,000
PV1 0.7513
Initial CA / PV 450,780

Subsequent:
CA x ER (10%)
Date Int. Income CA
1/2/23 450,780
12/31/23 45,078 495,858 Dr Disc; Cr Int. inc
12/31/24 49,586 545,444
12/31/25 54,544 599,988

2. A
SP/PV of notes 450,780 Dr NR Cr Disc NR
Carrying Value of asset sold -480,000 Dr Loss Cr Equipt
Gain (loss) -29,220

P-8
NR: LT (Non-int; Installment)
Initial: Present value
Subsequent: Amortized cost

Initial:
Installment Payment 1,200,000
A1 1.76
Initial CA / PV 2,112,000

Subsequent:
Date Annual Interest Principal Carrying
Payment 9% (AP - Int) Amount
12/31/22 2,112,000
12/31/23 1,200,000 190,080 1,009,920 1,102,080
12/31/24 1,200,000 99,187 1,100,813 0
P-9
Factoring w/o recourse - sale transaction (derecognized the asset and recog. gain (loss)
w/ recourse - loan (continue to recog. the asset and liability related to loans)

Selling Price 4,950,000 Cash 4,950,000

CA of AR: Gross 5,750,000 Loss 300,000
Allow. D.A. -500,000 5,250,000 Allow for DA 500,000
Loss on Factoring -300,000 AR 5,750,000

P - 10
Assignment of receivable
- loan agreement, we continue to recog. the receivable and liability related to the loan, no
recognition for gain or loss.

P - 11
Assignment - loan (receivable used as collateral - Recog. A & L)

1.
Notes Payable 2,500,000 Cash 2,375,000
Finance Fee (2.5 x 5%) -125,000 FC 125,000
Proceeds 2,375,000 NP 2,500,000

2. AR-ass 3,000,000
Notes Payable 2,500,000 AR 3,000,000
Payment (1M - .05) 950,000
Interest (2.5M x 12% x 1/12) -25,000 925,000 Cash 950,000
Notes Payable 12/31 1,575,000 SD 50,000
AR-ass 1,000,000
3.
AR - assigned (3,000,000 - 1,000,000) 2,000,000 Asset NP 925,000
NP 12/31 1,575,000 Liability Int. exp 25,000
Equity in assigned accounts 425,000 Disclosed Cash 950,000

P - 12
Discounting w/ recourse - loan (recog. A & L)
w/o recourse - sale (derecog. Asset & recog. Gain or loss)

Principal 3,700,000
Add: Interest (Prin. X SR x Term) 111,000 (3,700,000 x 12% x 90/360)
Maturity value 3,811,000 MV x DR x DP
Less: Discount (MV x DR X DP) 95,275 (3,811,000 x 15% x 60/360)
Proceeds 3,715,725

Selling Price/Proceeds 3,715,725

CA of Notes Receivable:
Face amount 3,700,000 FA X SR X Acc. Period
 Add: Accrued Interest 37,000 -3,737,000 (3,700,000 x 12% x 30/360)
Loss (w/o rec.) / Interest expense (w/ rec.) -21,275