EXERCISES

Exercise 3-1
Presented below are various receivable transactions entered into by Brewer Tool Company.
Indicate whether the receivables are reported as trade receivables or nontrade receivables on the
balance sheet.

a. Loaned a company officer P4,000.

b. Accepted a P2,000 promissory note from a customer as payment on account.
c. Determined that a P10,000 income tax refund is due from the IRS.
d. Sold goods to a customer on account for P5,000.
e. Recorded P500 accrued interest on a note receivable due next year.
f. Made a credit card sale for P3,000.
g. Advanced P1,000 to a trusted employee.

Exercise 3-2

Prepare journal entries to record the following transactions entered into by Elway Company:

2018
June 1 Received a P20,000, 12%, 1-year note from Sue Gold as full payment on her

account.

Nov. 1 Sold merchandise on account to Peyson, Inc. for P10,000, terms 2/10, n/30.

Nov. 5 Peyson, Inc. returned merchandise worth

P500. Nov. 9 Received payment in full from Peyson,

Inc.

Dec. 31 Accrued interest on Gold's note.

2018
June 1 .................................................................
...................................

Nov. 1 . ....................................
............................................................................

Nov. 5 .............................................
.............................

Nov. 9 .....................................................................................
............................................
.............................

Dec. 31 ...............................................................
.........................................................
Exercise 3-3
Record the following transactions for Wheeler Company.
1. On April 12, sold P12,000 of merchandise to Finney Inc., terms 2/10, n/30.
2. On April 15, Finney returned P2,000 of merchandise.
3. On April 22, Finney paid for the merchandise.

1........................................................................
....................................................................................
2. ........................................................
...........................................................
3.....................................................................
.....................................................
)............................

Exercise 3-4

At December 31, 2018, Attwood Company reported Accounts Receivable of P34,000 and
Allowance for Doubtful Accounts of P3,500. On January 7, 2019, Brady Enterprises declares
bankruptcy and it is determined that the receivable of P1,200 from Brady is not collectible.
1. What is the net realizable value of Accounts Receivable at December 31, 2018?
2. What entry would Attwood make to write off the Brady account?
3. What is the net realizable value of Accounts Receivable after the Brady account is written off?

Exercise 3-5
Kiley Company had a P700 credit balance in Allowance for Doubtful Accounts at December 31,
2018, before the current year's provision for uncollectible accounts. An aging of the accounts
receivable revealed the following:
Estimated Percentage
Uncollectible
Current Accounts P120,000 1%
1–30 days past due 12,000 3%
31–60 days past due 10,000 6%
61–90 days past due 5,000 12%
Over 90 days past due 8,000 30%
Total Accounts Receivable P155,000
Instructions
(a) Prepare the adjusting entry on December 31, 2018, to recognize bad debts expense.
(b) Assume the same facts as above except that the Allowance for Doubtful Accounts account
had a P500 debit balance before the current year's provision for uncollectible accounts.
Prepare the adjusting entry for the current year's provision for uncollectible accounts.
(c) Assume that the company has a policy of providing for bad debts at the rate of 1% of sales,
that sales for 2018 were P550,000, and that Allowance for Doubtful Accounts had a P650
credit balance before adjustment. Prepare the adjusting entry for the current year's provision
 for bad debts.

Exercise 3-6
Lloyd Products is undecided about which base to use in estimating uncollectible accounts. On
December 31, 2018, the balance in Accounts Receivable was P680,000 and net credit sales
amounted to P3,500,000 during 2018. An aging analysis of the accounts receivable indicated that
P36,000 in accounts are expected to be uncollectible. Past experience has shown that about 1%
of net credit sales eventually are uncollectible.

Instructions
Prepare the adjusting entries to record estimated bad debts expense using the (1) percentage of
sales basis and (2) the percentage of receivables basis under each of the following independent
assumptions:
(a) Allowance for Doubtful Accounts has a credit balance of P3,200 before adjustment.
(b) Allowance for Doubtful Accounts has a debit balance of P730 before adjustment.