ILLUSTRATIVE EXAMPLES

Trade and Other Receivables

1. Pinnacle 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 ledger details revealed the following:

Trade accounts receivable P775,000

Trade notes receivable 100,000
Trade installments receivable, normally due one (1) to two (2) 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 balance
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
Total P2,000,000

Requirements:
a. Compute the amount to be presented as “trade and other receivables” under current
assets.
b. Indicate the classification and presentation of the other items excluded from “trade and
other receivables”.
2. At the beginning of current year, Mr. Accounting Company reported the following:

Accounts receivable P2,000,000

Allowance for doubtful accounts 100,000

Additional information for the current year:

1. Cash sales of the entity amounts to P800,000 and represents 10% of gross sales.

2. Ninety percent (90%) of the credit sales customers do not take advantage of the 5/10,
n/30 terms.

3. Customers who did not take advantage of the discount paid P5,940,000.

4. It is expected that cash discounts of P10,000 will be taken on accounts receivable

outstanding as of December 31, 2023.

5. Sales returns amounted to P80,000. All returns were from charge sales.

6. During the year, accounts totaling P60,000 were written off as uncollectible. Recoveries
during the year amounted to P10,000. This amount is not included in the collections.

7. The allowance for doubtful accounts is adjusted so that it represents 5% of outstanding

accounts receivable at year-end.

Requirements:
a. Prepare journal entries to record the transactions.
b. Compute for the net realizable value of accounts receivable at year-end.