University of Pangasinan

PHINMA Education Network

CMA SY2020-21 SUMMER ENHANCEMENT PROGRAM

DAY 1: Accounts Receivable, Notes Receivable, Receivables - Additional Concepts

Learning Objectives:

1. To measure initial and subsequent receivable

2. To established the correct amounts of receivables.

Problem 1-1 (Accounts Receivable)

VJG CO. provided some information on their financial records on December 2020:

Accounts Receivable January 1 1,920,000

Collections of Accounts Receivable 6,240,000
Doubtful Accounts 200,000
Inventory, January 1 2,880,000
Inventory, December 31 2,640,000
Accounts Payable, Jan.1 1,000,000
Accounts Payable, Dec. 31 1,500,000
Cash Sales 1,200,000
Purchases 4,800,000
Gross Profit on Sales 2,160,000

Requirement: Compute the ending balance of Accounts Receivable on December 31, 2020.
Problem 1-2 (Analyzing Various Receivable Transactions)

The December 31, 2019, statement of financial position of VGJ Company include the following
information:

Accounts Receivable 672,000

Less: Allowance for bad debts (42,300) 629,700
Notes Receivable* 65,400
Total receivables P695,100

*The company is contingently liable for discounted notes receivable of P114,000.

During the year ending December 31, 2020, the following transactions occurred:

1. Sales on credit 2,623,800

2. Collection of accounts receivable 2,523,000
3. Accounts receivable written off as uncollectible 41,400
4. Notes Receivable collected 87,000
5. Customer notes received in payments of accounts receivable 216,000
6. Notes Receivable discounted that were paid at maturity 108,000
7. Noted receivable discounted that were defaulted, 6,075
including interest of P60 and P15 fee. This amount is
expected to be collected during 2017.
8. Proceeds from customer notes discounted with recourse
(Principal P135,000, accrued interest, P600) 135,225
9. Collections on account previously written off 1,500
10. Sales returns and allowances (on credit sales) 6,000
11. Bad debts were estimated to be 1.5% of credit sales.

Requirements:
Based on the given information, compute the balances of the following accounts at December 31, 2020.
(a) Accounts Receivable
a) 515,475
b) 513,975
c) 473,718
d) 509,400
(b) Allowance for Doubtful accounts
 a) 39,357
b) 41,757
c) 40,857
d) 40,800
( c) Notes Receivable
a) 59,400
b) 200,400
c) 329,400
d) 194,400
(d) Notes Receivable (Discounted)
a) 135,000
b) 114,000
c) 129,000
d) 120,000

Problem 1-3 (Correct Current Receivables)

On December 31, 2020, the “Receivables” account of VJG Company shows an amortized cost of
P1,950,000. Subsidiary details show the following:

Trade accounts receivable, P775,000; Trade notes receivable, P100,000; installments receivable, normally
due one (1) year to 2(two) years, P300,000; Customer’s account reporting credit balances arising from
sales returns, P30,000; Advance payments for purchase of merchandise, P150,000; Customer’s accounts
reporting credit balances arising from advance payments, P20,000; cash advances to subsidiary, P400,000;
Claims from insurance company, P15,000; Subscription receivable due in 60 days,P300,000; Accrued
Interest Receivable, P10,000.

How much should be presented as “trade and other receivables” under current assets?
Problem 1-4 (Aging of Receivables)

VJG Company showed the following information related to the accounts receivable in order to estimate
bad debts through the use of the aging. The credit period of the company is 30 days on the average.

Age of Receivables Amount

Under 30 days 4,000,000
31 – 60 days 1,500,000
61 – 90 days 1,000,000
91 – 120 days 500,000
121 – 150 days 200,000
151 – 180 days 100,000

The company experienced the following percentage of collectability:

accounts written off for less than 30 days 97%

accounts which are overdue 31-60 days 90%
accounts which are overdue 61-90 days 75%
accounts which are overdue 91-120 days 55%
accounts which are overdue 121-150 days 30%
accounts which are overdue 150-180 days 25%

What is the carrying value of accounts receivable for the balance sheet reporting purposes?
Problem 1-5 ( Changes in Accounts Receivable)

The balances of selected accounts taken from December 31, 2019 of VJG Company are shown below:

Accounts receivable 674,000

Allowance for DA 24,000

The following transactions (in summary) affecting accounts receivable occurred during the year ended
December 31, 2020:
Sales (all on account, terms, 2/10,1/15, n/60) 3,000,000
Cash received from customers 3,200,000
The cash received includes the following:
Customers paying w/in the 10-day discount period 1,764,000
Customers paying w/in the 10-day discount period 990,000
Recovery of accounts written off 6,000
Customer paying beyond the discount period ?
Accounts receivable written off as worthless 22,000
Credit memo for sales returns 12,000

It is the company policy to provide for uncollectible accounts equal to 1% of sales.

How much is the carrying value of the accounts receivable as of December 31, 2020?
Problem 1-6

On June 11, 2019, VJG Company loaned DEAN Corp P500,000 on 12% notes, payable in five annual
installments of P100,00 beginning January 2, 2020. In connection with this loan, DEAN was required to
deposit P5,000 in a non-interest-bearing escrow account. The amount held in escrow is to be returned
to DEAN after all principal and interest payments have been made. Interest on the notes is payable on
the first day of each month beginning July 1, 2019. DEAN made timely payments through November 1,
2019. On January 2, 2020, VJG Company received payment of the principal installment plus all interest
due. How much would be VJG’s interest receivable on the loan to DEAN at December 31, 2019?

Problem 1-7 (Present Value of Note)

On December 31, 2020, VJG Company received two P50,000 notes receivable from customers in
exchange for services rendered. On both notes, interest is computed on the outstanding principal
balance at the annual rate of 3% and payable at maturity. The note from PH Corp. made under
customary trade terms, is due in nine months and the note from DEAN, Inc. is due in five years. The
market interest rate for similar notes on December 31, 2020 was 8%. The compound interest factors to
convert future values into present value at 8% follow:

Present value of 1 due in nine months .944

Present value of 1 due in five years .680
At what amounts should these two notes receivable be reported in VJG’s December 31, 2020 statement
of financial position?