BANGAYAN, MELODY D. Dr. Lyssander Rodan C.

Dela Cruz
ACCTG 024- ACTCY31S1 December 10, 2020

ASSIGNMENT #2
RECEIVABLE AND INVENTORY

Question No. 1

Prepare all relevant journal entries to record the sale, allowance for sales discount and
cash discount availed by the customer under PAS 18 and PFRS 15.

1. PAS 18
Accounts Receivable 100,000
Sales 100,000

Sales discount (100,000 x 2% x 50%) 1,000

Allowance for sales discount 1,000

Cash (100,000 x 60% x 98%) 58,800

Allowance for sales discount 1,000
Sales discount [100,000 x (60% - 50%) x 2%] 200
Accounts receivable (100,000 x 60%) 60,000

2. PFRS 15
Accounts Receivable 100,000
Refund liability 1,000
Sales [100,000 - (100,000 x 2% x 50%)] 99,000

Cash (100,000 x 60% x 98%) 58,800

Sales discount [100,000 x (60% - 50%) x 2%] 200
Refund liability 1,000
Accounts receivable (100,000 x 60%) 60,000
Question No. 2

Provide all the necessary entries under PAS 18 and PFRS 15 assuming:

Requirement 1
PAS 18
2018 Accounts Receivable 150,000
Sales Revenue 150,000

Cost of goods sold 100,000

Inventory 100,000

Estimated Sales Returns 45,000

Accounts Receivable 45,000

COGS 30,000
Inventory 30,000

2019 Sales Returns 22,500

Allowance for Sales Returns 45,000
Cash 82,500
Accounts Receivable 150,000

PRFS 15
2018 Accounts Receivable 105,000
Sales 105,000

Cost of Sales 70,000

Asset for right to recover product 30,000
Inventory 100,000

2019 Cash 82,500

Sales Return 22,500
Accounts Receivable 105,000

Inventory 45,000
Cost of Sale 15,000
Asset for right to recover product 30,000
 Requirement 2
PAS 18
2018 No journal entry as no revenue is recognized because the company
cannot estimate reliably any future returns.

2019 Accounts Receivable 150,000

Sales Revenue 150,000
Cost of goods sold 100,000
Inventory 100,000

PRFS 15
2018 Asset for right to recover 100,000
product

Inventory 100,000

2019 Accounts Receivable 150,000

Sales Revenue 150,000
Cost of Sale 100,000
Asset for right to 100,000
recover product
Question No. 3

Adjusting entries on Dec. 31, 2018

A. Cost of Merchandise Sold PHP 20, 000

Inventory PHP 20, 000

B. Not Required

C. Not Required

D. Sales PHP 40, 000

Accounts Receivable PHP 40,000

E. Sales PHP 100,000

Inventory PHP 56, 000
Accounts Receivable PHP 100,000
Cost of Merchandise Sold PHP 56, 000

F. Accounts Receivable PHP 60, 000

Sales PHP 60, 000

G. Not Required

H. Accounts Receivable PHP 80, 000

Cost of Merchandise Sold PHP 55, 000
Sales PHP 80, 000
Inventory PHP 55, 000

Question No. 4

What is the balance in allowance for doubtful accounts at December 31, 2018?
P580, 000
COMPUTATIONS:
Allowance for doubtful accounts 1/1/18 P170, 000
Establishment of accounts written off in prior years 80,000
Customer accounts written off in 2018 (300,000)
Bad debt expense for 2018 (P21, 000, 000 X 3%) 630,000
Allowance for doubtful accounts 12/31/18 P580, 000

Question No. 5

If doubtful accounts are 3% of accounts receivable, determine the bad debt

expense to be reported for 2018.

P223, 000

COMPUTATIONS:
Accounts receivable P4, 100, 000
Percentage 3%
Bad debt expense, before adjustment 123, 000
Allowance for doubtful accounts (debit balance) 100, 000
Bad debt expense for 2018 P 223, 000

Question No. 6

1. The accounts receivable as of December 31, 2018 is

P 3, 000, 000
2. The allowance for doubtful accounts as of December 31, 2018 is
P180, 000
3. The net realizable value of accounts receivable as of December 31, 2018 is
P2, 814, 000
4. The doubtful account expense for the year 2018 is
P181, 000
COMPUTATIONS:
1. Expected cash discounts P 6, 000
Divide by percentage of cash discount 0.02_
Portion of AR that will be granted cash discounts 300, 000
Divide by percentage of total AR estimated to take
advantage of the discount 0.10_
Accounts receivable, 12/31/18 P3, 000,000

2. Accounts receivable, 12/31/18 P3,000,000

Multiply by bad debt rate
[(P40, 000/P1,000,000) x 1.5] 0.06
Allowance for doubtful accounts, 12/31/18 P 180,000

3. Accounts receivable, 12/31/18 P3, 000, 000

Less: Allowance for doubtful accounts (P180, 000)
Allowance for sales discounts 6,000 (186, 000)
Net realizable value, 12/31/18 P2, 814, 000

4. Allow. for doubtful accounts, 12/31/18 P180,000

Add accounts written off 44,000
Total 224, 000
Less: Allow. for doubtful accounts, 12/31/17 (P40, 000)
Bad debt recoveries (3, 000) (43, 000)
Doubtful accounts expense for 2018 P181, 000

Question No. 7

1. How much is the adjusted balance of the allowance for doubtful accounts as of
December 31, 2018?
P537, 600
 2. How much is the doubtful accounts for the year 2018?
P547, 600
3. The recorded allowance for doubtful accounts should be increased by how
much?
P187, 600

COMPUTATIONS:
NO. 1
Balance in Estimated % Estimated
Each Category Uncollectible amount
uncollectible
Month Sale
November-December 2018 2,280,000 2% 45,600
July-October 2018 1,200,000 15% 180,000
January-June 2018 800,000 25% 200,000
Prior to January l, 2018 140,000 80% 112,000
4,420,000 537,600

NO. 2
Sales 18,000,000
Rate for Doubtful account 2%
Total 360,000
Add: Changes in Allow. For doubtful acc. 187,600
Doubtful account for 2018 547,600
NO. 3
Doubtful accounts - Beginning 260,000
Add: Accrual during the year 360,000
Recoveries 30,000
Total 650,000
Less: Write-off 180,000
Total changes in allowance for doubtful Accounts 470,000

Total increase for Doubtful Accounts

Adjusted balance of Doubtful Accounts 537,600
Add: Prior to Jan 1. 120,000
Less: Changes in Allowance for doubtful accounts 470,000
Total increase in doubtful accounts 187,600
Question No. 8

1. How much is the gain or loss on sale of office equipment in 2018?

PHP 1, 053, 960
2. How much is the interest income for 2018?
PHP 228, 475
3. How much is the carrying amount of the note on December 31, 2018?
PHP 28, 475
4. How much is the current portion of the note on December 31, 2018?
PHP 0
5. How much is the non-current portion of the note on December 31, 2018?
PHP 1, 932, 435

COMPUTATIONS:
NO. 1
Present value of principal (2,000,000 x 0.7118) 1,423,600
Add: Present value of interest payments (2,000,000 x 480,360
10% x 2.4018)
Total Present value 1,903,960
Less: Carrying amount of machinery cost 1,000,000
Accumulated depreciation (150,000) 850,000
Gain on Sale 1,053,960

NO. 2-5

Amortization table
Date Interest Interest Discount Carrying Amount
collection Income Amortization
01/01/2016 1,903,960
31/12/2016 200,000 228,475 28,475 1,932,435
31/12/2017 200,000 231,892 31,892 1,964,327
31/12/2018 200,000 235,704 35,672 2,000,000

The total amount of current portion of note is 0.

The total amount of 1,932,435 is reported as noncurrent receivable since it is due
to be collected beyond twelve months from the end of the reporting period.