Problem 1

The following T-account summarizes the transactions affecting the accounts receivable of
Cherry Company for 2020:

Accounts Receivable
Jan. 1 balance after deducting Collections from customers,
credit balance of P3,000 ₱53,000 including overpayment of P5,000 ₱620,000
Charge sales 625,000 Write-offs 3,500
Charge for goods out on Merchandise returns 2,500
consignment 5,000 Allowance to customers
Shareholders' for shipping damages 1,500
subscriptions 30,000 Collections on carrier claims 1,000
Accounts written off but Collection on subscriptions 15,000
recovered 1,000
Cash paid to customer for 2,500
Jan. 1 credit balance
Deposit on contract 15,000
Claim against common carrier
for shipping damages 1,500
IOUs from employees 500
Cash advance to affiliate 10,000
Advances to supplier 5,000

Required:
1) Prepare the adjusting journal entries.
2) Determine the correct Accounts Receivable balance.
Use this sheet for your answers.
Problem 2
You are examining the financial statements of Dori Co. for the year ended December 31, 2020.
During the audit of the accounts receivable and other related accounts, certain information was
obtained. From this information, you are to compute:
a) The correct balance of the Accounts Receivable account
b) The correct amount to be reported as Allowance for Doubtful Accounts
c) Proposed audit adjustments (journal entries).

The December 31, 2020 debit balance in the Accounts Receivable control account is P197,000.
The only entries in the Bad Debts expense were: A credit for P324 on December 1, 2020,
because Company A remitted in full for the accounts charged off on October 31, 2020, and a
debit on December 31 for the amount of the credit to the Allowance for Doubtful Accounts.

The Allowance for Doubtful Accounts schedule is presented below:

Debit Credit Balance
January 1, 2020 ₱3,658
October 21, 2020, Uncollectible;
Co. A, P324; Co. B, P820;
Co. C, P564 ₱1,508 2,150
Dec. 31, 2020, 5% of P197,000 ₱9,850 12,000

An aging schedule of the accounts receivable as of December 31, 2020 and the decisions are
shown in the table below.
Amount to which the Allowance is to be adjusted after
Age Net debit balance Adjustments and Corrections have been made
0-1 month 93,240 1%
1-3 months 76,820 2%
3-6 months 22,180 3%
over 6 months 6,000 Definitely uncollectible, P1,000; P2,000 is considered
50% uncollectible; the remainder is estimated to be
80% collectible.

There is a credit balance in one account receivable (0-1 month) of P2,000; it represents
an advance on a sales contract. Also, there is a credit balance in one of the 1-3 months
accounts receivable of P500 for which merchandise will be accepted by the customer.

The ledger accounts have not been closed as of December 31, 2020. The Accounts
Receivable control account is not in agreement with the subsidiary ledger. The difference
cannot be located, and the auditor decides to adjust the control to the sum of the
subsidiaries after corrections are made.
Use this sheet for your answers.
Problem 3
Jasper Company included the following in its notes receivable as of December 31, 2020:
Note receivable from sale of land 880,000
Note receivable from consultation 1,200,000
Note receivable from sale of equipment 1,600,000

In connection with your audit, you were able to gather the following transactions during
2020 and other information pertaining to the company's notes receivable:

* On January 1, 2020, Jasper Company sold a tract of land to three doctors as an investment.
The land, purchased 10 years ago, was carried on Jasper Company's books at a value
of P500,000. Jasper received a noninterest-bearing note for P880,000 from the doctors.
The note is due on December 31, 2021. There is no readily available market for the
land, but the current market rate of interest for comparable notes is 10%.

* On January 1, 2020, Jasper Company finished consultation services and accepted in

exchange a promissory note with a face value of P1,200,000, a due date of December 31,
2022, and a stated rate of 5%, with interest receivable at the end of each year. The fair value
of the services is not readily determinable and note is not readily marketable. Under the
circumstances, the note is considered to have an appropriate imputed rate of interest of 10%.

* On January 1, 2020, Jasper Company sold equipment with a carrying amount of P1,600,000
to Sapphire Company. As payment, Sapphire gave Jasper Company a P2,400,000 note. The
note bears an interest rate of 4% and is to be repaid in three annual installments of P800,000
(plus interest on the outstanding balance). The first payment was received on December 31,
2020. The market price of the equipment is not reliably determinable. The prevailing rate of
interest for notes of this type is 14%.

The following data are also available:

Present value of 1 for 2 periods at 10% 0.8264
Present value of 1 for 3 periods at 10% 0.7513
Present value of an annuity of 1 for 3 periods at 10% 2.4869

Based on the above information, compute for the following:

1) The consultation service fee that should be recognized in 2020
2) The gain on sale of equipment that should be recognized in 2020
3) The noncurrent notes receivable as of December 31, 2020
4) The current portion of long-term notes receivable as of December 31, 2020
5) The interest income to be recognized in 2020
Use this sheet for your answers.