PROBLEM SOLVING – ACCOUNTS RECEIVABLE

1. Dreamer 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 same date.

Subsidiary details revealed the following:

Trade accounts receivable 775,000

Trade notes receivable 100,000
Installments receivable, normally due 1 year to 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 balances arising from advance payment (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

Required:
a. Prepare one compound entry to reclassify the receivables account.
b. Compute the amount to be presented as “trade and other receivables” under current assets.
c. Indicate the classification and presentation of the other items excluded from “trade and other receivables”.

2. Credible Company provided the following T-Account summarizing the transactions affecting the accounts receivable for the current
year:

Accounts Receivable
Jan. 1 balance 600,000 Collections from customers 5,300,000
Charge sales 6,000,000 Write-off 35,000
Shareholders' subscriptions 200,000 Merchandise returns 40,000
Allowances to customer for
Deposit in contract 120,000 shipping damages 25,000
Claims against common carrier for
damages 100,000 Collections on carrier claims 40,000
IOUs from employees 10,000 Collection on subscriptions 50,000
Cash advance to affiliates 100,000
Advances to a supplier 50,000

Required:
a. Compute the correct amount of accounts receivable.
b. Prepare one compound entry to adjust the accounts receivable.
c. Compute the amount to be presented as “trade and other receivables” under current assets.
d. Indicate the classification and presentation of the other items.

3. Affectionate Company sold merchandise on account for P500,000. The terms are 3/10, n/30. The related freight charge amounted to
P10,000. The account was collected within the discount period.

Required:
Prepare journal entries to record the transactions under the following freight terms:
a. FOB Destination and freight collect.
b. FOB Destination and freight prepaid.
c. FOB Shipping point and freight collect.
d. FOB Shipping point and freight prepaid.

4. Fiancee Company records sales return during the year as a credit to accounts receivable. However, at the end of the accounting
period, the entity estimates the probable sales return and records the same means of an allowance account.

The following transactions occurred in summary form:

a) Sale of merchandise on account, 2/10, n/30 4,000,000
b) Collection within discount period 1,470,000
c) Collection beyond the discount period 1,000,000
d) Sales return granted 100,000
e) Sales return estimated at the end of the year 20,000

Required:
Prepare journal entries to record the transactions.
 PROBLEM SOLVING – ACCOUNTS RECEIVABLE
5. On June 15, 2019, Romela Company sold 100 air conditioning units. The sale price for each unit is P45,000. All sales are subject to
terms 2/10, n/30. The entity used the gross method of accounting for accounts receivable.
Required:
a. Prepare journal entry to record the sale.
b. Prepare journal entry to record receipt of the payment, assuming the correct amount was received on June 25, 2019.
c. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on July 10, 2019.

6. On February 14, 2019, Prime Company sold 50 air conditioning units. The sale price for each unit is P50,000. All sales are subject to
terms 2/10, n/30. The entity used the net method of accounting for accounts receivable.
Required:
a. Prepare journal entry to record the sale.
b. Prepare journal entry to record receipt of the payment, assuming the correct amount was received on February 24, 2019.
c. Prepare the journal entry to record receipt of the payment, assuming the correct amount was received on March 10, 2019.