INTERMEDIATE ACCOUNTING 1 — REVIEWER

BACHELOR OF SCIENCE IN ACCOUNTANCY 2-1

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES — TAGUIG
PROF. U.C. VALLADOLID

MODULE 2 — RECEIVABLES
PROBLEMS

1. Information from the records of Adiaen Company is shown

below: Accounts receivable – net of P8,000 credit balance

in customers' accounts 100,000
Notes receivable (trade) 15,000
Notes receivable (non-trade), P15,000 collectible
within one year 30,000
Dividends receivable 2,000
Subscriptions receivable 2,000
Advances to officers and employees (due in 10 months) 4,000
Accounts payable - net of P10,000 debit balance in
suppliers' accounts 3,000

How much is the total trade receivables?

a. 108,000 b. 118,000 c. 123,000 d. 133,000

How much is the total current receivables?

a. 156,000 b. 144,000 c. 150,000 d. 154,000

2. Atong Company has the following information on December 31, 2022 before any year-end adjustments.

Allowance for doubtful accounts, Jan 1 30,400

Write-offs 19,000
Recoveries 3,800
Sales (including cash sales of ₱380,000) 2,280,000
Sales returns and discounts
(including ₱3,800 sales returns on cash sales) 22,800
Accounts receivable, Dec. 31 570,000
Percentage of credit sales 3%

How much is the recoverable historical cost of accounts receivable?

a. 498,370 b. 502,630 c. 486,780 d. 478,970
3. Adriano Company has the following information before any year-end adjustment.

Accounts receivable, Dec. 31 200,000

Allowance for doubtful accounts, Jan. 1 6,000 (Dr.)
Percentage of receivables 2%

Recoveries and write-offs during the year amounted to ₱1,000 and ₱7,600, respectively.

How much is the bad debts expense for the year?

a. 3,400 b. 4,600 c. 16,600 d. 10,600

4. Baliling Company has the following information:

Days outstanding Receivable balances % uncollectible

0 - 60 180,000 1%

61 - 120 135,000 2%

Over 120 150,000 6%

Total accounts receivable 465,000

During the year, ABC Co. wrote off ₱10,500 receivables and recovered ₱6,000 that had been written-off
in prior years. The allowance for doubtful accounts has a beginning balance of ₱3,000.

How much is the doubtful accounts expense for the year?

a. 20,000 b. 25,000 c. 15,000 d. 30,000

5. Barbas Company has an 8% note receivable dated June 30, 2022, in the original amount of
P1,500,000. Payments of P500,000 in principal plus accrued interest are due annually on July 1, 2023,
2024 and 2025.

What is the balance of note receivable on July 1, 2023?

a 1,500,000 b. 1,000,000 c. 500,000 d. 0

In the June 30, 2024 statement of financial position, what amount should be reported as a current
asset for interest on the note receivable?

a. 120,000 b. 40,000 c. 80,000 d. 0

6. On December 31, 2022, Batista-on Company received two P1,000,000 notes receivable from customers in
exchange for services rendered. On both notes, interest is calculated on the outstanding principal balance at
the annual rate of 3% and payable at maturity.

The note from Hart Company, made under customary trade terms, is due in nine months and the note from Maxx
Company is due in five years.

The market interest rate for similar notes on December 31, 2022 was 8%. The compound interest factors to convert
future value into present value at 8% follow:

Present value of 1 due in nine months .944

Present value of I due in five years 680

What is the carrying amount of notes receivable on December 31,2022?

Hart Maxx
a. 944,000 680,000
b. 965,000 782,000
c. 1,000,000 680,000
d. 1,000,000 782,000

7. On July 1, 2022, Bergado Company sold equipment to Arya Stark Company for P1,000,000. Jon Snow accepted
a 10% note receivable for the entire sales price. This note payable in two equal installments of P500,000 plus
accrued interest on December 31, 2022 and December 31, 2023. On July 1, 2023, the entity discounted the note at
a bank at an interest rate of 12%. What is the amount received from the discounting of note receivable?

a. 484,000 b. 493,500 c. 503,500 d. 517,000

8. Bigay Company factored P4,000,000 of accounts receivable without guarantee for a finance charge of 5%. The
finance entity retained an amount equal to 10 % of the accounts receivable for possible adjustments. What
amount should be recorded as gain or loss on the transfer of accounts receivable?

a. 200,000 gain c. 600,000 loss

b. 200,000 loss d. 0

9. On December 1, 2022, Bolaños Company assigned specific accounts receivable totaling P2,000,000 as
collateral on a P1,500,000, 12% note from a certain bank. The entity will continue to collect the assigned accounts
receivable.

In addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance on the
P1,500,000 value of the note. The December collections of assigned accounts receivable amounted to P1,000,000
less cash discounts of P50,000. On December 31, 2022, the entity remitted the collections to the bank in payment for
the interest accrued on December 31, 2022 and the note payable.
 What is the carrying amount of note payable on December 31, 2022?

a. 500,000 b.550,000 c. 565,000 d. 730,000

10. On June 30, 2022, Bonagua Company discounted at the bank a customer’s P6,000,000, 6 month, 10% note
receivable dated April 30, 2022.The bank discounted the note at 12% without recourse. What is the loss on
note receivable discounting?

a. 252,000 c. 52,000
b. 152,000 d. 48,000

11. Cadaeg Company received from a customer a one-year, P500,000 note bearing annual interest of 8%. After
holding the note for 6 months, the entity discounted the note without recourse at 10%. What amount of cash was
received from the bank?
a. 540,000 c. 513,000
b. 523,810 d. 495,238

Based on the information above, what is the loss on note receivable discounting?
a. 27,000 c. 12,000
b. 20,000 d. 7,000

12. On December 1, 2022, Capalad Company assigned P400,000 of accounts receivable to Halo Company as a
security for a loan of P335,000. Capalad Company charged a 2% commission on the amount of the loan; the
interest rate on the note was 10%. During December, Capalad collected P110,000 on assigned accounts after
deducting P380 of discounts. Capalad accepted returns worth P1,350 and wrote off assigned accounts totaling
P2,980.

What is the carrying value of the accounts receivable assigned as of December 31, 2022?

a. NONE c. 289,620
b. 285,290 d. 290,000

13. By the end of the current period, Carpio Company account receivable balance decreased by 220,000. Total credit
sales during the period amounted to 360,000, while write-offs and recoveries were 22,000 and 6,000 respectively.
How much is the total collections, excluding recoveries, during the period?
a. 556,000 c. 600,000
b. 558,000 d. 608,000

14. The following information pertains to Cuerdo Co.

Accounts receivable, beg. 140,000
 Allowance for doubtful accounts, beg. 18,000
Cash sales 450,000
Credit sales 680,000
Collections of accounts receivables, including recoveries 568,000
Write-off 12,000
Recoveries 2,000
Bad debts expense 28,000

Compute for carrying amount of accounts receivable in Cuerdo Co.’s end-of-period financial statements.

a. 208,000 c. 284,000
b. 304,000 d. 204,000

15. The following information relates to Del Rosario’s accounts receivable for 2022:

Account receivable, 1/1/2022 650,000

Credit sales for 2022 2,700,000
Sales return for 2022 75,000
Account written off during 2022 40,000
Collections from customers during 2022 2,150,000
Estimated future sales returns at 12/31/2022 50,000
Estimated uncollectible accounts at 12/31/2022 110,000

What amount should Del Rosario report for accounts receivable, before allowance for sales returns
and uncollectible accounts, on December 31, 2022?
a. 1,200,000 c. 1,085,000
b. 1,125,000 d. 925,000

16. Dela Cruz Co. had accounts receivable of 150,000 and allowance for doubtful accounts of 12,000 at the
beginning of the period. During the period, Dela Cruz Co. made total sales of 1,000,000 (40% were cash sales),
collected 410,000 accounts (excluding recoveries), wrote-off 9,000 accounts, recovered 2,000 accounts and
recognized bad debts expense of 15,000.

How much is the carrying amount of accounts receivable at the end of the period?
a. 411,000 c. 310,000
b. 311,000 d. 410,000

17. On January 2, 2022, a tract of land that originally cost 800,000 was sold by Delos Santos CORPORATION. The
company received a 1,200,000 note as payment. It bears interest rate of 4% and is payable in 3 annual installments
of 400,000 plus interest on the outstanding balance. The prevailing rate of interest for a note of this type is 10%. The
present value shows the following present value of 1 at 10%:

Present value factor 1 for 3 periods 0.75132

Present value factor 1 to 2 periods 0.82645
Present value factor 1 for 1 period 0.90909
Present value of an ordinary annuity of 1 for 3 periods 2.48685
 How much cash will DELOS SANTOS CORPORATION received from notes receivable?
a. 1,076,847 b. 1,200,000 c. 1,296,000 d. 1,476,847

18. The following selected transactions occurred during the year ended December 31, 2022 of Disomimba Company:

Gross Sales (Cash and Credit) P900,736.80

Collections from credit customers 294,000.00
Sales Discount 6,000.00
Cash Sales 180,000.00
Uncollectible accounts written off 19,200.00
Credits memos issued to credit customers for sales
return and allowance 10,080.00
Cash refunds given to cash customers for sales
return and allowance 15,168.00
Recoveries on accounts receivable written-off prior 6,505.20
years (not included in cash received stated above)

At a year-end, the company provides for estimated bad debts losses by crediting the Allowance for Bad Debts
account for 2% of its net credit sales for the year. The allowance for bad debts at the beginning of the year is
P19,327.20

The Accounts Receivable of Disomimba Company at December 31, 2022 is:

a. 408,042.00 b. 407,536.80 c. 401,536.80 d. 391,456.80

19. The accounts receivable of EMBESTRO COMPANY were stated at P1,467,000 in a balance sheet submitted to a
banker for credit. You are called upon to audit the report and, upon analysis, the asset was found to consist of the
following items:

Due from customers on open account P1,125,000

Acknowledge claim for damages 22,500
Due from consignee at billed price- cost price
being 22,500 30,000
Investment in and advance to affiliated company 150,000
Loans to officers and employees 13,500
Deposits with municipalities- bids for contracts 67,500
Unpaid Capital stock subscriptions 60,000
Advances to creditors for merchandise purchased
but not received 24,000
Cash advance of salesmen for traveling expenses 4,500
Allowance for doubtful accounts (30,000)
P1,467,000

The total current non-trade receivable balance at December 31

is: a. 64,500 b. 96,000 d.192,000
c.120,000

20. During December, 2022, the Accounts Receivable controlling account on the books of ENORE COMPANY
showed one debit posting and two credit postings. The debit represents receivables from December sales, P780,000.
One credit was for 470,400 made a result of cash collections on November and December receivables; the second
credit was an adjustment for estimated uncollectibles, P90,000. The December 31 balance was P270,000.

When receivables were collected, the bookkeeper credited Accounts Receivables for the cash collected. All
customers who paid their accounts during December took advantage of the 2% cash discount.

As of December 1, debit balance in customers’ subsidiary accounts totaled P177,000. An adjustment estimated
doubtful accounts of 18,000 had been posted to the Accounts Receivable controlling account at the end of 2023, and
no write-offs were recorded during 2022. In addition, a number of customers had overpaid their accounts, and as a
result, some of the customers’ subsidiary accounts had credit balances on Dec 1. No overpayments were made
during December nor were any credit balances in customers’ accounts reduced during December.

The Accounts Receivable beginning balance (unadjusted) of Enore Company at December 31, 2022
is: a. 50,400 b. 68,400 c. 252,000 d. 270,000

21. Gierza Company provided the following information for the current year:

Accounts Receivable on Jan. 1 1,300,000

Credit Sales 5,400,000
Collections from customers, excluding recovery 4,750,000
Accounts written off 125,000
Collection of accounts written off in prior year
(customer credit was not reestablished) 25,000
Estimated uncollectible receivables per aging of
receivables at December 31 165,000

What is the balance of accounts receivable, before allowance for doubtful accounts on December 31?
a. 1,825,000 c. 1,950,000
b. 1,850,000 d. 1,990,000

22. Gonzales Company reported the following information at year-end:

Trade accounts receivable 1,300,000

Allowance for uncollectible accounts (20,000)
Claim against shipper for goods lost in
transit in November 30,000
Selling price of unsold goods sent by Miami
on consignment at 130% of cost and not
included in Miami’s ending inventory 260,000
Security deposit on lease of warehouse used
for storing some inventories 300,000
Total 1,500,000
What total amount should be reported as trade and other receivables under current assets at year-end?
a. 940,000 c. 1,240,000
b. 1,200,000 d. 1,500,000

23. Ibarra Company provided the following information relating to current operations:

Accounts receivable, January 1 4,000,000

Accounts receivable collected 8,400,000
Cash sales 2,000,000
Inventory, January 1 4,800,000
Inventory, December 31 4,400,000
Purchases 8,000,000
Gross margin on sales 4,200,000

What amount should be reported as accounts receivables on December 31?

a. 8,200,000 c. 2,000,000
b. 6,200,000 d. 4,200,000

24. Labuzon Company provided the following information during the first year of operations:

Total merchandise purchases for the year 7,000,000

Merchandise inventory on December 31 1,400,000
Collections from customers 4,000,000

All merchandise was marked to sell at 40% above cost. All sales are on a credit basis and all receivables
are collectible.

What amount should be reported as accounts receivables on December 31?

a. 1,000,000 c. 5,000,000
b. 3,840,000 d. 5,800,000

As of December 31, 2022, LIBERATO Company reported the following as the items comprising its P9,168,450 net
receivables balance:

Unassigned trade accounts receivables from customers P3,400,000

Subscription receivable due in 60 days 545,700
Assigned trade accounts receivables from customers 1,200,000
Trade accounts receivables payable in installment basis 647,500
due within 20 months
Trade receivables from executive employees 125,000
Advances to employees 100,000
Trade receivables which the Company received postdated checks 250,000
Trade receivables which the Company received stale checks 275,250
 Interest receivable on bond investment 300,000
Credit balances arising from customer accounts (55,000)
Loans and advances to affiliates 2,000,000
Debit balances on suppliers’ accounts 200,000
Advance payments to suppliers (down payments related to
purchase orders) 150,000
Receivables known to be worthless 30,000
Total P9,168,450

25. From the given data, determine the amount to be presented as trade receivables
a. 6,897,750 b. 6,895,350 c. 5,897,750 d. 5,765,323

26. From the given data, determine the amount to be presented as trade and other
receivables a. 8,193,450 b. 7,193,450 c. 6,193,450 d.
6,183,670

27. From the given data, determine the amount to be presented as noncurrent
receivables a. 3,000,000 b. 2,200,000 c. 3,200,000
d. 2,000,000

MALAGA Company reported the following items as components of its “Receivables” account as of December 31,
2022:

Collectible trade accounts receivables P2,000,000

Worthless trade accounts (actual) 40,000
Claim against property insurer for goods damaged in factory
fire - insurer committed to pay on January 2023 4,000,000
Selling price of goods held in the Company’s retail stores 500,000
Selling price of goods sent out of consignment 400,000
Security deposit on office space lease 1,000,000
Total receivables P7,940,000

28. How much should the Company report as total “trade and other receivables” as part of its currents
assets
a. 7,000,000 b. 6,000,000 c. 5,000,000 d. 8,000,000

29. Malit Company followed the procedure of debiting bad debt expense for 2% of all new sales.

Sales Allowance for Bad Debts

2020 3,000,000 40,000

2021 2,800,000 60,000

2022 3,500,000 80,000

 What was the amount of accounts written off in
2022? a. 10,000 c. 70,000
b. 50,000 d. 86,000

30. Marange Company sold a piece of machinery with a list price of P1,600,000 to Uriel Company on January 1,
2022. Uriel Company issued a noninterest bearing note of P1,700,000 due in one year. Marange Company normally
sells this type of machinery for 90% of list price. What amount should be recorded as interest revenue?
a. 0 c. 160,000
b. 100,000 d. 260,000

31. Masilang Company sold machinery to Ares Company on January 1, 2022 which the cash selling price was
P7,582,000. Ares entered into an installment sale contract with Masilang at an interest rate of 10%. The contract
required payments of P2,000,000 a year over five years with the first payment due on December 31, 2022. What is
the carrying amount of the machinery should be reported in 2022?
a. 9,582,000 c. 7,582,000
b. 6,340,000 d. 2,000,000

32. Mendoza Company sold accounts receivable without recourse with face amount of P6,000,000. The factor
charged 15% commission on all accounts receivable factored and withheld 10% of the accounts factored as
protection against customer returns and other adjustments. The entity had previously established an allowance for
doubtful accounts of P200,000 for these accounts. By year-end, the entity had collected the factor’s holdback there
being no customer returns and other adjustments.

What amount of cash was initially received from factoring?

a. 4,500,000 c. 5,400,000
b. 5,100,000 d. 6,000,000

33. Montemayor Company reported the “Receivables” account with a debit balance of P2,000,000 at year-end. The
allowance for doubtful accounts had a credit balance of P50,000 on the same date.

Subsidiary details revealed the following:

Trade accounts receivable 775,000
Trade notes receivable 100,000
Installment receivable, normally due 1 year to two years 300,000
Customers’ accounts reporting credit balances arising from sales return (30,000)
Advance payments for purchase of merchandise 150,000
Customers’ accounts reporting credit balances arising from advance payments (20,000)
Cash advance to subsidiary 400,000
Claim from insurance entity 15,000
Subscriptions receivable due in 60 days 300,000
Accrued interest receivable 10,000
2,000,000
What is the amount to be presented as “trade and other receivables” under current assets?
a. 2,300,000 c. 1,600,000
b. 1,450,000 d. 1,500,000

34. At the beginning of current year, Obane Company showed the following account balances:

The following summary transactions occurred during the current year:

Sales on account, 2/30, n/30 7,000,000
Collections from customers within the discount period 2,450,000
Collections from customers beyond the discount period 3,900,000
Accounts receivable written off as worthless 30,000
Recovery of accounts previously written off not
included in the above collections 10,000
Credit memo for sales return 70,000

What is the net realizable value of accounts receivable at year-end?

a. 1,040,000 c. 1,540,000
b. 1,440,000 d. 1,004,500

35. At the beginning of current year, Pagayunan Company reported the following balances:

Accounts receivable 600,000

Allowance for doubtful accounts 25,000

The following transactions took place in the current year.

Sales – cash and credit 3,070,000
Cash received from credit customers 2,455,000
Cash received from credit customers who took advantage
of the 3/10, n/30 credit terms (included in No. 2) 1,455,000
Accounts receivable written off as worthless 20,000
Cash received from cash customers 470,000
Credit memo for sales return and allowances
issued to credit customers 55,000
Cash refunds to cash customers 10,000
Recoveries of accounts written off, not include in above collections 5,000

What is the net realizable value of accounts receivable at year-end?

a. 600,000 c. 1,440,000
b. 560,000 d. 1,240,000

36. From inception of operations, Palaspas Company carried no allowance for doubtful accounts. Uncollectible
receivables were expensed as written off and recoveries were credited to income as collected. During the current
year, management recognized that the accounting policy with respect to doubtful accounts was not correct, and
determined that an allowance for doubtful accounts was necessary. A policy was established to maintain an
allowance for doubtful accounts based on historical bad debt loss percentage applied to year-end accounts
receivable.

The historical bad debt loss percentage is to be recomputed each year based on all available past years up to a
maximum of five years.
 Year Credit Sales Accounts Written Recoveries
Off

2017 1,500,000 15,000 0

2018 2,200,000 40,000 2,000

2019 3,000,000 50,000 3,000

2020 3,300,000 65,000 5,000

2021 4,000,000 88,000 10,000

Accounts receivable balances were P1,250,000 and P2,000,000 on January 1, 2021 and December 31,
2021, respectively

What is the doubtful account expense for the current year?

a. 34,000 c. 39,000
b. 36,000 d. 42,000

37. Panganiban Company's allowance for doubtful accounts was P1,000,000 at the end of 2022 and P900,000 at the
end of 2021.

For the year ended December 31, 2022, the entity reported doubtful account expense of P250,000 in the
income statement.

What amount was debited to the appropriate account to write off uncollectible accounts in 2022?
a. 150,000 c. 250,000
b. 100,000 d. 350,000

38. Romano Company provided the following information in relation to accounts receivable at year-end:

Days Outstanding Estimated Amounts % Collectible

0-60 1,200,000 99%

61-120 900,000 98%

Over 120 1,000,000 94%

3,100,000

During the current year, the entity wrote off 70,000 in accounts receivable and recovered 20,000 that had
been written off in prior years.

At the beginning of current year, the allowance for uncollectible accounts was 60,000.
Under the aging method, what amount of uncollectible accounts expense should be reported for the current
year?
a. 90,000 c. 70,000
b. 80,000 d. 60,000

39. Santos Company provided the following information for the current year:

Jan 1, Allowance for Doubtful Accounts 200,000

Credit Sales 5,000,000

Accounts Receivable deemed worthless and written off 300,000

As a result of a review and aging of accounts receivable, it has been predetermined that an allowance for doubtful
accounts of 400,000 is needed on December 31.

What amount should be recorded as doubtful accounts expenses for the current year?
a. 400,000 c. 500,000
b. 300,000 d. 700,000

40. Sarmiento Company reported the following transactions for the year just ended:

Credit Sales 2/10, 1/20, n/60 5,000,000

Accounts deemed worthless 50,000

Cash Received paying within 10 days 2,450,000

Cash Received paying beyond 10 days but within 20 days 1,485,000

Cash Received paying beyond 20 days 495,000

Recovered Accounts written off (not yet included on cash 19,000

receipts)

Accounts Receivable, beg. 650,000

What is the ending Balance of Accounts

Receivable? a. 1,124,000 c. 1,105,000
b. 1,170,000 d. 1,189,000

Segovia Company factored P1,000,000 of accounts receivable at year-end. Control was surrendered. The factor
accepted the accounts receivable subject to recourse for nonpayment. The factor assessed a fee of 2% and retained
a holdback equal to 4% of the accounts receivable. In addition, the factor charged 12% interest computed on a
weighted-average time to maturity of 51 days (assumed 365 days in a year).
 The fair value of the recourse obligation is P20,000.

41. What is the amount of cash initially received from the

factoring? a. 923,233
b. 735,432 c. 940,000
d. 56,767

42. What total amount should be recognized initially as loss on factoring the accounts receivable?
a. 980,000 c. 56,767
b. 960,000 d. 16,767

43. Sipat Company received from a customer a one-year, P1,500,000 note bearing annual interest of 8%. After
holding the note for six months, the entity discounted the note without recourse at 10%.

What amount of cash was received from the bank?

a. 1,620,000 c. 1,539,000
b. 201,000 d. 1,450,000

44. On August 31, 2022, Sumanting Company discounted with recourse a note at the bank at discount rate of 15%.
The note was received from the customer on August 1, 2022, is for 90 days, has a face amount of P6,000,000, and
carries an interest rate of 12%. The discounting transaction is accounted for as secured borrowing. The customer
paid the note to the bank on October 30, 2022, the date of maturity.

What amount of cash was received from the bank?

a. 154,500 c. 180,000
b. 6,180,000 d. 6,025,000
Answer Key and Solution (Problems)

1.1 C

Solution:
Accounts receivable 100,000
Add back credit balance in customer’s accounts 8,000
Adjusted accounts receivable 108,000
Notes receivable 15,000
Total trade receivables 123,000

1.2 D
Solution:
Total trade receivables 123,000
Collectible notes receivable 15,000
Dividends receivable 2,000
Advances to officers and employees 4,000
Advances to suppliers (debit balance of suppliers) 10,000
Total current receivables 154,000
2. A
Solution:
Total sales 2,280,000
Less: cash sales (380,000)
Gross credit sales 1,900,000
Less: Sales returns and discounts (22,800 – 3,800) (19,000)
Net credit sales 1,881,000
Percentage of credit sales 3%
Bad debt expense 56,430
Allowance for doubtful accounts
30,400 Jan 1
Write-offs 19,000 3,800 Recoveries
56,430 Bad debt expense
Dec 31 71,630

Accounts receivable, Dec. 31 - gross 570,000

Allowance for doubtful accounts, Dec. 31 (71,630)
Accounts receivable, Dec. 31 – net 498,370

3. C
Solution:
Allowance for doubtful accounts
Beg. balance , Jan 1 6,000
Write-offs 7,600 1,000 Recoveries
16,600 Bad debt expense
Dec 31 4,000
4. C
Solution:

Days outstanding Receivable balances % uncollectible Required allowance

0 - 60 180,000 1% 1,800

61 - 120 135,000 2% 2,700

Over 120 150,000 6% 9,000

Total accounts receivable 465,000 13,500

Allowance for doubtful accounts

3,000 Beg. balance
Write-offs 10,500 6,000 Recoveries
15,000 Bad debt expense
End. balance 13,500

5.1 B

Solution:

Note receivable, June 30, 2015 1,500,000

Payment on July 1, 2016 ( 500,000)
Note receivable, July 1, 2016 1,000,000

5.1 C

Solution:

Accrued interest receivable - June 30, 2017

(1,000,000 x 8%) 80,000

6. D

Solution:

The note receivable from Hart is reported at the face amount of P1,000,000 because it is due within one year or
short-term and made under customary trade terms despite the fact that the 3% interest rate of the note is lower than
the 8% prevailing interest rate.

The note receivable from Maxx is reported at the present value of the principal and interest because the 3% stated
interest rate is lower than the 8% prevailing market interest rate and the note is long-term, due in 5 years.
 Principal 1,000,000
Interest for 5 years (1,000,000 x 3% x 5) 150,000
Maturity value 1,150,000
Multiply by present value factor .680
Present value of note 782,000

7. D

Solution:

Principal 500,000
Add: Interest (500,000 x 10%) 50,000
Maturity Value 550,000
Less: Discount (550,000 x 12% x 6/12) 33,000
Net Proceeds 517,000

8. B

Solution:

Loss on Factoring - equal to finance (5% x 4,000,000) = 200,000

9. C

Solution:

Note Payable 1,500,000

Principal Payment:
Remittance 950,000
Interest (1,500,000 x 12% x 1/12) (15.000) 935,000
Note Payable - December 31 565,000

10. C
Solution:
Principal 6,000,000
Add: Interest (6,000,000 x 10% x 6/12) 300,000
Maturity Value 6,300,000
Less: Discount (6,300,000 x 12% x 4/12) (252,0000)
Net Proceeds 6,048,000

Principal 6,000,000
Accrued Interest (6,000,000 x 10% x 2/12) 100,000
Carrying amount of note receivable 6,100,000

Net Proceeds 6,048,000

CA of Note Receivable (6,100,000)
Loss on Note Receivable discounting (52,000)
11. C
Solution:
Principal 500,000
Add: Interest (500,000 x 8%) 40,000
Maturity Value 540,000
Less: Discount (540,000 x 10% x 6/12) (27,000)
Net Proceeds 513,000

11.2. D
Solution:
Principal 500,0000
Accrued interest receivable (500,000 x 8% x 6/12) 20,000
Carrying amount of note receivable Net Proceeds 520,0000

Net Proceeds 513,000

Carrying amount of note receivable 520,000
Loss on note receivable discounting ( 7,000 )

12. B
Solution:
Account Receivable Assigned 400,000
Less: Amount Collected(110,000 + 380) 110,380
Sales Return 1,350
Write-off 2,980 114,710
Carrying value of account receivable assigned 285,290

13. B
Solution:
Accounts receivable
beg. 220,000
Credit sales
360,000 558,000 Collections, excluding recoveries
22,000 Write-off

- end.

14. D
Solution:

Accounts receivable
beg. 140,000
Credit sales 680,000 568,000 Collections, excluding recoveries
12,000 Write-off

240,000 end.

Allowance for bad debts

18,000 beg.
 Write-off 12,000 28,000 Bad debts
2,000 Recovery
end. 36,000

Carrying amount = 240,000 – 36,000 = 204,000

15. C

Solution:

650K + 2.7M – 75K – 40K – 2.15M = 1.085M

Account receivable, 1/1/2022 650,000

Add: Credit Sales 2,700,000
Total: 3,350,000
Less: Sales return 75,000
Account written off during 2022 40,000
Collections from customers during 2022 2,150,000
Total: 1,085,000

16. B
Solution:

Accounts receivable
beg. 150,000
Credit sales 600,000 410,000 Collections, excluding recoveries
9,000 Write-off

331,000 end.

Allowance for bad debts

12,000 beg.
Write-off 9,000 15,000 Bad debts
2,000 Recovery
end. 20,000

Carrying amount = 331,000 – 20,000 = 311,000

17. C
Solution:

2018 (1,200,000x4%) 48,000+400,000= 448,000

2019 (800,000x4%) 32,000+400,000=432,000
2020 (400,000x4%) 16,000+400,000=416,000
Total 1,296,000
18. D
Solution:
Accounting Receivable
(900,736.80-294,000)Credit Sales 720,736.80 Collection 294,000.00
Recoveries 6,505.20 Sales Discount 6,000.00
Write- off 19,200.00
Sales Returns 10,080.00
Recoveries 6,505,20
727,242,00 335,785.20
Ending Bal 391,456.80

19. A
Solution:
Claims Receivable 22,500
Advances to off/empl
(13,500+4,500) 18,000
Advances to suppliers 24,000
Total 64,500

20. A
Solution:
Ending Balance of AR control account 270,000
Add: Credits during December 560,400
Less: Debits during December (780,000)
Beginning Balance 50,400

21. A
Solution:
Accounts receivable - January 1 1,300,000
Add: Credit sales 5,400,000
Total 6,700,000

Less: Collection from customers 4,750,000

Accounts written off 125,000 (4,875,000)
Accounts receivable - December 31 1,825,000

22. A
Solution:
Trade accounts receivable 930,000
Allowance for uncollectible accounts (20,000)
Claim receivable 30,000
Total trade and other receivables 940,000

23. B
Solution:
Inventory - January 1 4,800,000
Purchases 8,000,000
 Goods available for sale 12,800,000
Inventory - December 31 (4,400,000)
Cost of goods sold 8,400,000
Gross margin on sales 4,200,000
Gross sales 12,600,000
Cash sales (2,000,000)
Credit sales 10,600,000
Accounts receivable - January 1 4,000,000
Total 14,600,000
Accounts receivable collected (8,400,000)
Accounts receivable - December 31 6,200,000

24. B
Solution:
Purchases 7,000,000
Inventory - December 31 (1,400,000)
Cost of goods sold 5,600,000
Markup on cost (40% x 5,600,000) 2,240,000
Sales (140% x 5,600,000) 7,840,000
Collections from customers (4,000,000)
Accounts receivable - December 31 3,840,000

25. C

Solution:
Unassigned trade accounts receivables from customers 3,400,000
Assigned trade accounts receivables from customers 1,200,000
Trade accounts receivables payable in installment basis
due within 20 months 647,500
Trade receivables from executive employees 125,000
Trade receivables which the Company received postdated checks 250,000
Trade receivables which the Company received stale checks 275,250
Trade Receivables 5,897,750

26. B

Solution:
Unassigned trade accounts receivables from customers 3,400,000
Subscription receivable due in 60 days 545,700
Assigned trade accounts receivables from customers 1,200,000
Trade accounts receivables payable in installment basis
due within 20 months 647,500
Trade receivables from executive employees 125,000
Advances to employees 100,000
Trade receivables which the Company received postdated checks 250,000
 Trade receivables which the Company received stale checks 275,250
Interest receivable on bond investment 300,000
Debit balances on suppliers’ accounts 200,000
Advance payments to suppliers (down payments related to
purchase orders) 150,000
Trade and Other Receivables 7,193,450

27. D

Solution:
Loans and advances to affiliates 2,000,000
Noncurrent Receivables 2,000,000

28. B
Solution:
Collectible trade accounts receivables P2,000,000
Claim against property insurer for goods damaged in factory
fire - insurer committed to pay on January 2022 4,000,000
Trade and Other Receivables 6,000,000

29. B
Solution:
Allowance for bad debts - 12/31/2020 60,000
Bad debts expense for 2021 (2% x 3,500,000) 70,000
Total 130,000
Allowance for bad debts - 12/31/2021 - 80,000
Accounts written off in 2021 50,000

30. D
Solution: Note receivable 1,700,000
Present value equal to cash prize (1,600,000 x 90%) 1,440,000
Interest revenue 260,000
31. B
Solution:
Installment receivable - 01/01/2022 7,582,000
Payment on 12/31/2022 2,000,000
Interest income for 2022 (7,582,000 x 10%) 758,200 1,241,800
Carrying amount - 12/31/2022 6,340,000

32. A
Solution:
Accounts receivable 6,000,000
Factor’s holdback (10% x 6,000,000) (600,000)
Commission (15% x 6,000,000) (900,000)
Cash received 4,500,000

33. C
Solution:

Accounts receivable 775,000

Allowance for doubtful accounts (50,000)
Notes receivable 100,000
Installment receivable 300,000
Advances to suppliers 150,000
Claim receivable 15,000
Subscription receivable 300,000
Accrued interest receivable 10,000
Total Trade and Other Receivables 1,600,000

34.B
Solution:
Accounts receivable – December 31 1,500,000
Allowance for doubtful accounts (4%x1.5M) (60,000)
Net realizable value 1,440,000

35. C
Solution:

Accounts receivable 625,000

Less: Allowance for doubtful accounts 60,000
Net realizable value 1,440,000

36. A
Solution:

Allowance – January 1, 2022 20,000

Recoveries – 2021 10,000
Doubtful accounts – 2020 (SQUEEZE) 92,000
Total 122,000
Less: Writeoff – 2021 88,000
Allowance – Dec 31, 2021 (.017 x 2M) 34,000

37. A
Solution:
Beg. Balance 900,000
Add:DoubtfulAccountsExpense 250,000
Less: Write Off: ? 150,000
Ending Balance: 1,000,000
*work back to get debited account (write off)

38. B
Solution:
Allowance for Bad Debts Expense (Aging Method):
Basis × % Total

1,200,000 × 1% 12,000

900,000 × 2% 18,000
 1,000,000 × 6% 60,000

Allowance for Doubtful Accounts 90,000

Allowance for Doubtful Accounts

Debit Credit

Write-Off 70,000 60,000 Beg. Balance

20,000 Recoveries
80,000 Doubtful Accounts Expense?
160,000 Total
70,000 Less: Debit
90,000 End, Allowance for Doubtful Accounts
*workback to get the Doubtful Accounts Expense

39. C
Solution:
Beg, Allowance: 200,000
Less: Write-Off: 300,000
Add: Doubtful Accounts Expense? 500,000
Ending, Allowance: 400,000
*workback to get doubtful accounts expense: 400,000 + 300,000 - 200,000 = 500,000

Using T-account:
Allowance for Doubtful Accounts
Debit Credit

Write-Off 300,000 200,000Beg. Balance

5 00,000 Doubtful Accounts Expense ? 700,000Total
300,000Less: Debit
400,000End, Allowance for Doubtful Accounts

*workback to get the Doubtful Expense: 700,000 - 200,000 = 500,000

40. C
Solution
:
Accounts Receivable
Debit Credit

A/R, beg. 650,000 50,000 Write-Off (2)

(1) Credit Sales 5,000,000 2,450,000 Collection (3)
(6) Recoveries 19,000 50,000 Sales Discount (3)
1,485,000 Collection (4)
15,000 Sales Discount (4)
 495,000 Collection (5)
19,000 Recovery (6)

Total Debit Less: Credit 5,669,000 4,564,000 Total Credit

-4,564,000
Ending, A/R
1,105,000
Journal Entries of Each Transaction:

Accounts Receivable 5M Cash 1,485,000

Sales 5M Sales Discount 15,000
A/R 1,500,000
Allowance for Doubtful Accounts 50,000 *A/R = 1,485,000 ÷ 99%
Accounts Receivable 50,000 *SD = 1,500,000 × 1%
Cash 2,450,000 Cash 495,000
Sales Discount 50,000 A/R 495,000
A/R 2,500,000
A/R 19,000
*A/R = 2,450,000 ÷ 98% Allowance for Doubtful Accounts 19,000
*SD = 2,500,000 × 2%
Cash 19,000
A/R 19,000

41. A
Solution:
Accounts receivable 1,000,000
Factor’s holdback (1,000,000x 4%) (40,000)
Factoring fee (1,000,000x 2%) ( 20,000)
Interest ( 1,000,000 x 12%x 51/365) ( 16,767)
Cash initially received from factoring. 923,233

42. C
Solution:
Cash 923,233
Due from fac 40,000
Factoring fee 20,000
Interest expense 16,767
Loss on recourse obligation 20,000
Accounts receivable 1,000,000
Recourse liability 20,000

Factoring fee (1,000,000x 2%) 20,000

Interest (1,000,000 x 12%x 51/365) 16,767
 Recourse obligation 20,000
Total loss on factoring initially recognized 56,767

43. C
Solution:
Principal 1,500,000
Interest (1,500,000 x 8%) 120,000
Maturity value 1,620,000
Less: Discount (1,620,000 x 10% x 6/12) (81,000)
Net proceeds 1,539,000

44. D
Solution:
Principal 6,000,000
Interest (6,000,000 x 12% x 90/360) 180,000
Maturity value 6,180,000
Less:Discount(6,180,000x15%x60/360) (154,500)
Net proceeds 6,025,500