PRACTICE SET: AUDIT OF SALES AND RECEIVABLES

1. Interlaken Company provided the following data for the current year:
Accounts receivable, January 1 650,000
Credit sales 2,700,000
Sales returns 75,000
Accounts written off 40,000
Collections from customers 2,150,000
Estimated future sales returns at December 31 50,000
Estimated uncollectible accounts at 12/31 per aging 110,000

What is the amortized cost of accounts receivable on December 31?

2. Louisiana Company provideed the following transactions affecting accounts
receivable during the current year:
Sales – cash and credit 5,900,000
Cash received from credit customers, all of whom took 3,024,000
advantage of the discount feature of the credit terms
4/10, n/30
Cash received from cash customers 2,100,000
Accounts receivable written off as worthless 50,000
Credit memorandum issued to credit customers for sales 250,000
returns and allowances
Cash refunds given to cash customers for sales returns 20,000
and allowances
Recoveries on accounts receivable written off as 80,000
uncollectible in prior periods not included in the cash
received from customers stated above

Balances on January 1
Accounts receivable 950,000
Allowance for doubtful accounts 100,000

The entity provided for doubtful account expense by crediting allowance for
doubtful accounts in the amount of P70,000 for the current year.
a. What amount should be reported as accounts receivable on December 31?
b. What amount should be reported as allowance for doubtful accounts on
December 31?

3. Glasgow Company started business at the beginning of current year. The entity
established an allowance for doubtful accounts estimated at 5% of credit sales.
During the year, the entity wrote off P50,000 of uncollectible accounts.

Further analysis showed that merchandise purchased amounted to P9,000,000 and

ending merchandise inventory was P1,500,000. Goods were sold at 40% above
cost.

The total sales comprised 80% sales on account and 20% cash sales. Total
collections from customers, excluding cash sales, amounted to P6,000,000.

a. What amount should be reported as cost of goods sold?

b. What amount should be reported as sales on account?
c. What is the net realizable value of accounts receivable at year-end?

4. Windermere Company provided the following information pertaining to accounts

receivable at year-end:
 Days outstanding Amount Uncollectible
0-60 1,200,000 5%
61-120 900,000 10%
Over 120 1,000,000 20%

During the current year, the entity wrote off P100,000 in accounts receivable
and recovered P50,000 that had been written off in prior years. At the
beginning of current year, the allowance for doubtful accounts was P150,000.

a. Under the aging method, what amount of allowance for doubtful accounts
should be reported at year-end?
b. Which amount shoud be recognized as doubtful accounts expense for the year?

5. On January 1, 2021, Ambleside Company reported accounts receivable P2,000,000

and allowance for doubtful accounts P100,000. The entity provided the following
data:
Credit sales Writeoffs Recoveries
2018 11,000,000 250,000 20,000
2019 13,000,000 305,000 35,000
2020 14,000,000 300,000 40,000
2021 15,000,000 200,000 50,000

The collections from customers during 2021 totaled P14,000,000, excluding

recoveries.
Doubtful accounts are provided for as a percentage of credit sales.
The entity calculated the percentage annually by using the experience of the
three years prior to the current year.
a. What amount should be reported as doubtful accounts expense for 2021?
b. What amount should be reported as allowance for doubtful accounts on
December 31, 2021?
c. What is the net realizable value of accounts receivable on December 31,
2021?