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Activity1 Midterms
Activity1 Midterms
ACTIVITY NO. 2
Read the remaining topics for accounts receivable (aging of receivable) and the 1st topic on notes
receivable. Answer the activity afterwards. Upload your accomplished file before the deadline.
When the allowance method of recognizing bad debts expense is used, the entry to record the
write-off of a specific uncollectible account would decrease
the allowance for doubtful accounts.
the profit for the period.
the net realizable value of accounts receivable.
the working capital.
Which of the following factors would show the largest value for an interest rate of 12% for six
periods?
Present value of 1
Present value of an ordinary annuity of 1
Present value of an annuity due of 1
Answer cannot be determined
Under the allowance method of recognizing bad debts on trade accounts receivable, the effect of
writing off an account to an entity's working capital is
increase
decrease
either a or b depending on the current level of the entity's working capital
no effect
COMPREHENSIVE PROBLEMS – Provide the requirements and show the solution for each
number.
On December 27, 20x1, KRISTANJOY Co. received a sale order for a credit sale of goods with selling
price of ₱3,000. The goods were shipped by DULS on December 31, 20x1 and were received by the
buyer on January 2, 20x2. The related shipping costs amounted to ₱20. KRISTANJOY Co. collected the
receivable on January 5, 20x2. If the term of the sale is FOB destination, freight collect.
FRANCHEZ Co. has the following information on December 31, 20x1 before any year-end
adjustments.
Net credit sales 6,300,000
Accounts receivable, December 976,500
Allowance for doubtful accounts, Dec. 31 (before any
53,550
necessary year-end adjustments)
Percentage of credit sales 2%
Additional information:
• FRANCHEZ Co. uses the percentage of credit sales in determining bad debts in monthly financial
reports and the aging of receivables for its annual financial statements.
• Accounts written-off during the year amounted to ₱119,700 and accounts recovered amounted to
₱28,350.
• As of December 31, FRANCHEZ Co. determined that ₱63,000 accounts receivable from a certain
customer included in the “61-120 days outstanding” group is 95% collectible and a ₱31,500
account included in the “Over 120 days outstanding” group is worthless and needs to be written-
off.
Requirements:
1. How much is the balance of the allowance for doubtful accounts on January 1, 20x1? [1]
2. How much is the adjusted bad debt expense to be reported in the year-end financial
statements? [2]
On January 1, 20x1, MILO. Co. sold machinery costing ₱3,000,000 with accumulated depreciation of
₱1,100,000 in exchange for a 3-year, ₱900,000 noninterest-bearing note receivable due as follows:
Requirements:
1. How much is the initial measurement of the receivable? [1]
2. How much is the carrying amount of the receivable on December 31, 20x2? [2]