moras eosnt etn CHAPTER 18 ACCOUNTS RECEIVABLE Problem 18-1 (AICPA Adapted) Roxy Company provided the following information relating to accounts receivable for the current year: Accounts receivable on January | 1,300,000 Credit sales 5,400,000 Collections from customers, excluding recovery 4,750,000 Accounts written off 125,000 Collection of accounts written off in prior year (customer credit was not reestablished) 23,000 Estimated uncollectible receivables per aging of receivables at December 31 165,000 What is the balance of accounts receivable, before allowance for doubtful accounts on December 31? a, 1,825,000 b. 1,850,000 ¢. 1,950,000 d. 1,990,000 Solution 18-1 Answer a Accounts receivable - January 1 Add: Credit sales Total Less: Collection from customers 4,750,000 Accounts written off 125,000 Accounts receivable - December 31 The recovery of accounts written off does nor affect the balance of accounts receivable because the effect is offsetting. 217Problem 18-2(AICPA Adapted) ‘ded the following data relating to Aco, Jay Company provi ‘ receivable for the current year: Accounts receivable, January | 650,94 Credit sales 2,700.09) Sales returns 75,00 Accounts written off 40, Collections from customers 2,150,099 Estimated future sales returns at December 31 _ 50,00) Estimated uncollectible accounts at 12/31 per aging 110,00 Whats the amortized cost of accounts receivable on December 31? a. 1,200,000 b. 1,125,000 c, 1,085,000 d, 925,000 Solution 18-2 Answer d Accounts receivable ~ January! 650,000 Credit sales 2,700,000 Total 3,350,000 Less: Collections from customers 2,150,000 Accounts written off 40,000 Sales returns 75,000 2,265,000 Accounts receivable - December 31 1,085,000 Accounts receivable 1,085,000 Less; Allowance for doubtful accounts 110,000 Allowance for sales returns 50,000 ‘Net realizable value The amortized cost of accounts receivable is realizable value,Problem 18-3 (AICPA Adapted) AL year-end, Miami Company reported that the current receivables consisted of the following: rade accounts receivable 930,000 Mlowance for uncollectible accounts ( 20,000) laim against shipper for goods lost in transit in November 30,000 price of unsold goods sent by mi on consignment at 130% of cost and included in Miami’s ending inventory 260,000 deposit on lease of warehouse for storing some inventories total amount should be reported as trade and other receivables sr current assets at year-end? 940,000 1,200,000 1,240,000 1,500,000 Solution 18-3 Answer a rade accounts receivable Allowance for uncollectible accounts ( 20,000) ‘aim receivable cost of the consigned goods of P200,000 (260.000 / 130%) d be included in inventory. The security deposit is a noncurrent receivable. agProblem 18-4 (LAA) Infra Company provided the following Sales on account Notes received to settle accounts Provision for doubtful accounts Accounts receivable written off Purchases on account Payments to creditors Discounts allowed by creditors Merchandise returned by customer Collections received to settle accounts Notes given to creditors in settlement of accounts Merchandise returned to suppliers Payments on notes payable Discounts taken by customers Collections received in settlement of notes data for the current year; 3,600, “me 90, 25, 3.9009 3,200,009 260,009 15,009 2,450,009 250,000 70,000 100,009 40,000 180,000 What is the net realizable value of accounts receivable at year-end? a. 605,000 b. 890,000 c, 825,000 d. 670,000 Solution /8-4 Answer a Sales on account Notes received to settle accounts Accounts receivable written off Merchandise returned by customer Collections received to settle accounts Discounts taken by customers Accounts receivable Allowance for doubtful accounts Net realizable value Provision for doubtful accounts Accounts written off Allowance for doubtful accounts 220blem 18-5 (AICPA Adapted) ‘examining the accounts of Brute Company, itis ascertained that lances relating to both receivables and payables are included in a Je controlling accountcalled “receivables control” witha debit balance 4,850,000, An analysis of the make-up of this account revealed following: Debit Credit counts receivable ~ customers 7,800,000 \de accounts receivable — officers 500,000 it balances — creditors 300,000 idated checks from customers 400,000 scriptions receivable 800,000 -ounts payable for merchandise 4,500,000 it balances in customers’ accounts 200,000 h received in advance from customers 100,000 cted bad debts 150,000 + further analysis of the aged accounts receivable, it is determined the allowance for doubtful accounts should be P200,000. /hat is the net realizable value of accounts receivable? 8,000,000 8,500,000 8,300,000 |. 8,550,000 /hat is the balance of accounts payable? . 4,200,000 b. 4,700,000 c. 4,500,000. d. 4,800,000 Solution 18-5 Question 1 Answer b Question 2. Answer c Accounts receivable ~ customers (7,800,000 + 400,000 postdated checks) | Allowautce for doubtful accounts ( eet > Trade accounts receivable-officers Son ni! | Net realizable value 8,500. ba ‘ $500,000 counts payable 4.00.00Problem 18.6 (AICPA Adapted) Faith Company provided the following information felating © yr, Operations: Accounts receivable, January 1 4,000,009 Accounts receivable collected 8,400,009 Cash sales 2.00000) Inventory, January | 4,800,009 Inventory, December 31 preyed Purchases a Gross margin on sales eivable on December 31? ‘What is the balance of accounts ree 8,200,000 a b, c. d Solution 18-6 Answer b Inventory ~ January | Purchases Goods available for sale Inventory ~ December 31 Cost of goods sold Gross margin on sales Gross sales Cash sales Credit sales — le = January 1 receivable collected ¢ 8,400,000) receivable ~ December 31 6,200,000 = 222Problem 18-7 (PHILCPA Adapted) Honduras Company revealed a balance of P8,200,000 in the accounts receivable control account at year-end, Ananalysis of the accounts receivable showed the following: Accounts known to be worthless 100,000 Advance payments to creditors on purchase orders 400,000 Advances to affiliated entities 1,000,000 Customers’ accounts reporting credit balances arising from sales returns ( 600,000) Interest receivable on bonds 400,000 Trade accounts receivable — unassigned 2,000,000 Subscription receivable due in 30 days 2,200,000 Trade accounts receivable — assigned (Finance Company's equity in assigned accounts is P500,000) 1,500,000 ‘Trade installments receivable due 1 — 18 months, including unearned finance charge of P50,000 850,000 Trade accounts receivable from officers, due currently 150,000 Trade accounts on which postdated checks are held entries were made on receipt of checks 200,000 8,200,000 Teported as trade accounts receivable at Answer a eceivable — unassigned ceivable — assigned tallments receivable (8: ‘ounts receivable ff ints. on which post trade accountsProblem 18-8 (IAA) ‘Von Company provided the following data for the current year in rel, to accounts receivable: Debits January | balance after deducting credit balance of P30,000 $30,009 Charge sales | 5,250,009 Charge for goods out on consignment 50.009 Shareholders’ subscriptions 1,000,009 Accounts written off but recovered . 10,000 Cash paid to customer for January | credit balance 250m Goods shipped to cover January I credit balance S09 Deposit on long-term contract $00,000 Claim against common carrier 400,000 Advances to supplier 300,060 Credits Collections from customers, including overpayment of P50,000 5,200,000 Writeoff 35,000 Merchandise returns 25,000 ‘Allowances to customers for shipping damages 15,000 50,000 Collection on carrier claim Collection on subscription 1, What is the balance of accounts receivable on December 31 a. 565,000 b. 595,000 ce. 545,000 d. 495,000 2. What total amount of trade and other recei' reported! under current assets? pieeaeeiee a. 1,745,000 b. 2,045,000 cc, 1,245,000 d. 1,195,000 3. What total amount: i What fools oan oF other receivables should be reported undet 9 a. 1,650,000 b. 1,150,000 1,300,000 e. d. 1,600,000Solution 18-8 Question I Answer b Accounts receivable ~ J, january | Charge sales “8 T ($30,000 + 30,000) $60,000 Accounts Written off but recovered rye Total : caeet ns Fomeustomers (5.200,000~50,000) tah ae Writeoff (3s ,000) Merchandise returns ( 25,000) Allowance to customers for shipping damages (15.000) Accounts receivable ~ December 31 595,000 Question 2 Answer c Accounts receivable 595,000 Claim receivable (400,000 — 50,000) 350,000 Advances to supplier 300,000 Total trade and other receivables 1,245,000 Question 3 Answer ¢ _ Subscriptions receivable (1,000,000 - 200,000) 800,000 it ot 2Problem 18-9 (IAA) Wonder Company provided the following transactions Atay accounts receivable during the current years Sales ~ cash and credit 5 Cash received from credit customers, all of whom 900.0 took advantage of the discount feature of the credit terms 4/10,n/30 3,024, Cash received from cash customers tea ‘Accounts receivable written off as worthless son Credit memorandum issued to credit customers for sales returns and allowances 250 Cash refunds given to cash customers for sales returns and allowances 200m Recoveries on accounts receivable written off as uncollectible in prior periods not included in cash received from customers stated above 80,000 Balances on January 1 Accounts receivable 950,00) ‘Allowance for doubtful accounts 100,000 \collectible account losses by crediting The entity provided -ounts in the amount of P70,000 for he allowance for doubt current year. 1 2. What is doubtful accounts otsolution 18-9 Question 1 Answer a accounts receivable ~ January | Credit sales Tol cash received from credit customers Sales discounts Accounts receivable written off ales returns and allowances Accounts receivable ~ December 31 Total sales Cash received from cash customers — cash sales Credit sales Gross accounts receivable collected (3,024,000 / 96%) Sales discounts (4% x 3,150,000) Cash received from credit customers Gross amount Cash discount (4/10 or 4% within 10 days) Net amount Question 2 Answer b Allowance for doubtful accounts ~ January 1 very of accounts written off Doubtful accounts expense for current year Total Accounts written off Allowance for doubtful accounts ~ December 31 227 3,150,000 (126,000) 3,024,000 100% |Problem 18-10 (PHILCRA A prdspted) Germany Company started The entity established 5% of credit sales. D unt of sales on account? 1,930,000 2,400,000Solution 18-10 Question I Answer q Goods available for sale Ending inventory Cost of goods sold Question 2 Answer Cost of goods sold Markup on cost (40% x. 7,500,000) Total sales Cash sales (20% x 10,500,000)" Sales on account Question 3 Answer a Sales on account Collections Accounts written off Accounts receivable ~ December 31 Provision for doubtful accounts (8,400,000 x 5%) Accounts written off Allowance for doubtful accounts ~ December 31 Accounts receivable Allowance for doubtful accounts Netreatizable value 9,000,000 (1,500,000) 2,500, 000 7,500,000 3,000,000 10,500,000 ( 2,100,000) 8,400,000 8,400,000 (6,000,000) (_ 30,000) 2,350,000 420,000 ( _S0,000) 370,000 2,350,000 (370,000) 1,980,000