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AUDIT OF RECEIVABLES
Problem 1
Your audit disclosed that on December 31, 2010, the accounts receivable control
account of Alilem Company had a balance of P2,865,000. An analysis of the
accounts receivable account showed the following
Accounts known to be worthless P37,500

Advance payments to creditors on purchase orders 150,000
Advances to affiliated companies 375,000
Customers’ accounts reporting credit balances arising (225,000)
from sales return
Interest receivable on bonds 150,000
Other trade accounts receivable-unassigned 750,000
Subscriptions receivable due in 30 days 825,000
Trade accounts receivable-assigned (Alilem company’s 375,000
equity in assigned accounts is P150,000)
Trade installment receivable due 1-18 months, including 330,000

unearned finance charges of P30,000
Trade receivables from officers due currently 22,500

Trade accounts on which post-dated checks are held (no 75,000
entries were made on receipts of checks)
P2,865,000
QUESTIONS:
Based on the above and the result of your audit, determine the adjusted balance of
following:
1. The trade accounts receivable as of December 31, 2010 is

a. P1,147,500 b. P1,522,500
c. P1,485,000 d. P1,447,500
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2. The net current trade and other receivables as of December 31, 2010 is
a. P2,647,500 b. 2610,000
c. P2,272,500 d. P1,822,500
3. How much of the foregoing will be presented under noncurrent assets as of
December 31, 2010?
a. P1,200,000 b. P375,000
c. P525,000 d. P0
Problem 2
Presented below are a series of unrelated situations. Answer the following questions
relating to each of the independent situations as requested.
1. Bantay Company’s unadjusted trial balance at December 31, 2010. included the
following accounts:
Debit Credit
Accounts receivable P1,000,000
Allowance for doubtful
accounts 40,000
Sales P15,000,000
Sales return and allowances 70,000
Bantay Company estimates its bad debt expense to be 1 ½% of net sales. Determine its
bad debt expense for 2010.
a. P225,000 b. P254,500 c. P214,500 d.P55,000
2. An analysis and aging of Burgos Corp. accounts receivable at December 31, 2010,
disclosed the following:
Amounts estimated to be uncollectible P1,800,000

Accounts receivable 17,500,000
Allowance for doubtful
accounts (per books) 1,250,000
What is the net realizable value of Burgos’ receivables at December 31, 2010?
a. P15,700,000 b. P17,500,000
c. P16,250,000 d. P14,450,000
3. Cabugao Company provides for doubtful accounts based 3% of credit sales. The
following data are available for 2010.
Credit sales during 2010 P21,000,000

Allowance for doubtful accounts 1/1/10 170,000
Collection of accounts written off in prior years 80,000
(Customer credit was reestablished)
Customer accounts written off as
uncollectible during 2010 300,000
What is the balance in allowance for doubtful accounts at December 31, 2010?
a. P630,000 b. P420,000 c. P500,000 d. P580,000
4. At the end of its first year of operations, December 3, 2010, Caoayan, Inc. reported the
following information:
Accounts receivable, net allowance for doubtful accounts P9,500,000

Customer accounts written off as uncollectible during 2010 240,000
Bad debts expense for 2010 840,000

What should be the balance in accounts receivable at December 31,2010 before subtracting the
allowance for doubtful accounts?
a. P10,100,000 b. P10,340,000
c. P9,740,000 d. P10,580,000
5. The following accounts were taken from Cervantes Inc.’s statement of financial position
at December 31, 2010.
Debit Credit
Accounts receivable P4,100,000
Allowance for doubtful accounts 100,000
Net credit sales P7,500,000
If doubtful accounts are 3% of accounts receivable, determine the bad debt
expense to be reported for 2010
a. P123,000 b. P23,000 c. P223,000 d.P225,000
Problem 3
You were able to obtain the following information from your audit of Magsingal
Corporation’s Accounts Receivable and Allowance for Doubtful Accounts
• From the general ledger you noted that the Accounts Receivable has a balance of
P848,000 as of December 31, 2010. Below is a transcript of the Allowance for Doubtful
Accounts:
Debit Credit Balance
January 1- Balance 20,000
July 31-Write-off P16,000 4,000
December 31- Provision P52,000
• The summary of the subsidiary ledger as of December 31, 2010 was totaled as
follows:
Debit balances:
Under one month P360,000
One to six months 368,000
Over six months 152,000
P880,000
Credit balances:
Alien P8,000- OK; additional billing in Jan, 2011
T. Twister 14,000- Should have been credited to Apol
Dee Lah 18,000- Advances on sales contract
P40,000
Account is one to six months classification
The customer’s ledger is not in agreement with the accounts receivable control.
The client requested you to adjust the control account to the subsidiary ledger
after corrections are made.
• It is agreed that 1 percent is adequate for accounts under one month. Accounts
one to six months are expected to require a reserve of 2 percent. Accounts
over sox months are analyzed as follows:
Definitely bad P48,000
Doubtful (estimated to be 50% collectible) 24,000
Apparently good, but slow
(estimated to be 90% collectible ) 80,000
Total P152,000
QUESTIONS:
Based on the above and the result of your audit, answer the following:
1. How much is the adjusted balance of Accounts Receivable as of December 31, 2010?
a. P818,000 b. P846,000 c. P832,000 d.P826,000
2. How much s the adjusted balance of the Allowance for Doubtful Accounts as of December
31, 2010?
a. P30,680 b. P31,240 c. P30,960 d. P30,760
3. How much is the Doubtful Accounts expense for the year 2010?
a. P74,680 b. P75,240 c. P74,960 d. P74,760
Problem 4
The statement of financial position of Santiago Corporation reported the following

long-term receivables as of December 31, 2009:
Note receivable from sale of plant P9,000,000

Note receivable from officer 2,400,000
In connection with your audit, you were able to gather the following transactions
during 2010 and other information pertaining to the company’s long term
receivables:
a) The note receivable from sale of plant bears interest at 12% per annum. The
note is payable in 3 annual installments of P3,000,000 plus interest on the
unpaid balance every April 1. The initial principal and interest payment was
made on April 1, 2010.
b) The note receivable from officer is dated December 31, 2009, earns interest at
10% per annum, and is due on December 31, 2012. The 2010 interest was
received on December 31, 2010.
c) The corporation sold a piece of equipment to Yes, Inc. on April 1, 2010, in

exchange for an P1,200,000 non interest bearing note due on April 1, 2012.
The note had no ready market, and there was no established exchange price for
the equipment. The
prevailing interest rate for a note of this type at April 1, 2010,was 12%. The
present value factor of 1 for two periods at 12% is 0.797 while the present
value factor of ordinary annuity of 1 for two periods at 12% is 1.690.
d) A tract of land was sold by the corporation to No Co. on July 1, 2010, for
P6,000,000 under an installment sale contract. No Co. signed a 4-year 11%
note for P4,200,000 on July 1, 2010, in additional to the down payment of
P1,800,000. The equal annual payments of principal and interest on the note
will be P1,353,750 payable on July 1, 2011, 2012, 2013, and 2014. The land
has an established cash price of P6,000,000, and its cost to the corporation
was P4,500,000. The collection of the installments on this note is reasonably
assured.
QUESTIONS:
Based on the above and the result of your audit, determine the following:
1. Noncurrent notes receivable as of December 31, 2010

a. P13,556,400 b. P9,664,650
c. P10,556,400 d. P9,750,726
2. Current portion of long-term notes receivables as of December 31, 2010

a. P3,891,750 b. P4,353,750
c. P3,000,000 d. P0
3. Accrued interest receivable as of December 31, 2010
a. P771,000 b. P857,076
c. P540,000 d. P1,011,000
4. Interest income for the year 2010

a. P1,281,000 b. P1,637,076
c. P1,367,076 d. P1,512,000
Problem 5
Vintar Company has the following transactions in 2010 involving notes receivable:
May 1 Received a P1,000,000, 90-day, 12% interest bearing note from A

Company in settlement of account
1 Received a P1,500,000, six month, 12% interest bearing note from B
Company in settlement of account
Jul. 30 A Company defaulted on the P1,000,000 note
Aug.1 Discounted the B Company note at a bank at 15%
Sep. 1 Received a one-year noninterest bearing note from C Company in
settlement of a P600,000 account receivable. The face value of the
note was P660,000
28 Collected the defaulted A Company note plus accrued interest at
12% per annum on the total amount due
Oct 1 Received a P2,500,000, 90 day note from D Company. The note is
for the payment goods purchased and ears interest at 12%
Nov. 1 B Company defaulted on the P1,500,000 note. Vintar Company paid

the bank the total amount due plus P60,000 for protest fee and other
bank charges
Dec. 30 Collected D Company note in full
31 Collected from B Company in full including interest on the total
amount due at 12% since default date
QUESTIONS:
Based on the above and the result of your audit, answer the following:
1. The proceeds from the discounted B Company note on August 1, 2010 is

a. P1,530,375 b. P1,487,062
c. P1,542,300 d. P1,000,000
2. The amount collected on September 28, 2010 on the defaulted A Company note is
a. P1,030,000 b. P1,050,600
c. P1,050,000 d. P1,081,500
3. The amount collected on December 31, 2010 on defaulted B Company note is
a. P1,683,000 b. P1,650,000
c. P1,681,800 d. P1,680,000
4. The interest income to be recognized in 2010 related to these transactions is

a. P268,600 b. P238,780
b. P223,600 d. P193,600

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AUDIT OF RECEIVABLES

Accounts known to be worthless P37,500

Trade installment receivable due 1-18 months, including 330,000

Trade receivables from officers due currently 22,500

1. The trade accounts receivable as of December 31, 2010 is

Amounts estimated to be uncollectible P1,800,000

Credit sales during 2010 P21,000,000

Accounts receivable, net allowance for doubtful accounts P9,500,000

Bad debts expense for 2010 840,000

a. P123,000 b. P23,000 c. P223,000 d.P225,000

The statement of financial position of Santiago Corporation reported the following

Note receivable from sale of plant P9,000,000

c) The corporation sold a piece of equipment to Yes, Inc. on April 1, 2010, in

1. Noncurrent notes receivable as of December 31, 2010

2. Current portion of long-term notes receivables as of December 31, 2010

4. Interest income for the year 2010

May 1 Received a P1,000,000, 90-day, 12% interest bearing note from A

Nov. 1 B Company defaulted on the P1,500,000 note. Vintar Company paid

1. The proceeds from the discounted B Company note on August 1, 2010 is

4. The interest income to be recognized in 2010 related to these transactions is

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