CHAPTER 16

ACCOUN RECEIVABLE
Problem 16-1 (AICPA Adapted)
Roxy Company provided the following information for the current
J c a r :

Accounts
receivable on January 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
ofreceivables at December 31 165,000
What is the balance of accounts receivable, before allowance for
doubtful accounts on December 31?
a. 1,825,000
b. 1,850,000
c. 1,950,000
d. 1,990,000

Solution 16-1 Answer a

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

ne recovery of accounts written off does not affect the balance of

accounts receivable because the effect is offsetting

205
 Problem 16-2 (AICPA Problem 16-3
(AICPA Adapted)
Adapted)
Jay Company provided the following data for the CCompany reported the following information at year-end:
current year:
Trade accounts receivable
Accounts receivable. January 1 930,000
for uncollectible accounts
Credit sales 650,000 Allowance 20,000)
Sales returns 2,700,000 Claim against shipper for
November
in
goods lost
Accounts written off 75,000 in transit 30,000
Collections from customers 40,000 Selling price
of
unsold goods sent by
Estimated future sales returns at December 31 2,150,000 Miami on consignment at 130% ofcost and
S0,000 not included in Miami's ending inventory
Estimated uncollectible accounts at 12/31 260,000
per aging l10,000 on lease of warehouse
Security deposit
used for storing some inventories
What is the amortized cost of accounts receivable on December 312 300,000
a. 1,200,00o Total 1,500,000
b. 1,125,000 What total amount should be reported as trade and other receivables
1.085,000
under current assets at year-end?
925,000
940,000
Solution 16-2 Answer d b. 1,200,000
c. 1,240,000
Accounts receivable Januaryl
Credit sales
650,000 d. 1,500,000
2,700,000
Total 3,350,000 Solution 16-3 Answer a
Less: Collections from customers 2,150,000
Accounts written off Trade accounts receivable 930,000
40,000 Allowance for uncollectible acounts
Sales returns 75,000 2,265,000 20,000)
Claim receivable 30,000
Accounts receivable - December 31
1,085,000 Total trade and other receivables
940.000
Accounts receivable 1,085,000
Less: Allowance for doubtful accounts The sellingprice of goods on consignment is excluded from accounts
110,000
receivable because the goods are still unsold.
Allowance for sales returns 50,000 160,000
Net realizable value 925,000 The cost of the
consigned goods
should be included in inventory.
of P200,000 (260,000/ 130%)
The amortized cost of accounts receivable is the same as the net
realizable value. he
security deposit is a noncurrent receivable.

206 207
Problem 16-6 (IAA)
Problem
16-7 (AICPA Adapted)
Aroma Company used the net price method ofaccounting for cacs Tune 1, 2021, Pitt Company sold merchandise with a list price of
discounts. In of its transactions on December 26, 2021, the entit
one
sold merchandise with a list price ofP5,000,000 to a
o 000,000 to Burr on account. Pitt allowed trade discounts of 30%
customer wha and 20%.
was given a trade discount
of 20%, 10% and 5%. Credit terms were
4/10, n/30. On June 11, 2021,
the
customer paid in full.
The goods were shipped FOB destination, fYeight collect. Total Credit terms were 2/10, n/30 and the sale was made FOB shipping point.
freight Pitt prepaid P200,000 of delivery costs for Burr as an accommodation.
charge paid by the customer was P100,000. On December 27,2021.
the customer returned
damaged goods originally billed at PS00,000, What amount should be reported as sales revenue?
What is the net realizable value of the accounts receivable on December a. 5,000,000

31, 2021? b. 2,800,000

c. 3,500,000
a. 3.420,000 d. 2,500,000
b. 2,920,000
c. 2.703,000 2. What amount was received by Pitt from Burr as remittance in full?
d. 2,803,200 a. 2,744,000
b. 2,940,000
Solution 16-6 Answer c . 2,944,000
d. 3,140,000
List price 5,000,000
Solution 16-7 Question 1 Answer b Question 2 Answer c
Trade discount (20% 5,000,000)
x
(1,000,000)
4,000,000 List price 5,000,000
Trade discount (10%x Trade discounts:
4,000,000) 400,000) 30% x 5,000,000 (1,500,000)
3,600,000
Trade discount (5% x 3,600,000) 180,000) 3,500,000
20% x 3,500,000 700,000)
Invoice price at gross 3,420,000
Sales return at gross Invoice price at gross - sales revenue 2,800.000
500,000) Cash discount (2% x 2,800,000) 56,000)
Gross amount of accounts receivable 2,920,000
Net amount 2,744,000
Cash discount (4% x 2,920,000) (16,800)
Add: Reimbursement of delivery cost 200,000
Accounts receivable at net amount 2,803,200 Total remittance from Burr
Freight charge 00,000) 2,944.000
Net realizable value 2.703.200
Note that the customer paid the account in full within the discount
period.
FOB destination means that the seller is responsible for the freight charge.
OB shipping point means the buyer is responsible for the freight
Freight collect means the common carrier will collect the freight charge charge.
from the buyer to be deducted from the accounts receivable upon remittance
or payment from the buyer. reight prepaid means the seller prepaid the freight charge as an
Ccommodation to be charged against the buyer upon full remittance.
210
211
 9466009243537

Problem 16-8
(PHILCPA Adapted)
Honduras Company revealed a balance roblem16-9 (AICPA Adapted)
receivable control account at of P8,200,000 in the account.
year-end. examining the accounts of Brute
An analysis of the
accounts receivable showed the following:
s
Whenrelating
balances relatto both
receivables andCompany, it is ascertain
ained that
Accounts known to be
ngle account called "receiva
controllin;
es
payables are
included in a
ofP4,850,000. An analysis of the control"
worthless
Advance payments to creditors on 100,000 the following: make-up of thiswith a debit balance
account revealed
Advances to affiliated entities purchase orders 400,000
Customers' accounts
reporting credit balances arising 1,000,000 ACcounts receivable - customers Debit Credit
from sales returns
Trade receivable
accounts
7,800,000
Interest receivable on bonds 600,000) officers
-

Debit balances creditors 500,000

Trade accounts receivable
unassigned-
400,000 etdated checks from customers 300,000
Subscription receivable due in 30 days 2,000,000 Subscriptions receivable 400,000
Trade accounts receivable
assigned (Finance
- 2,200,000 Accounts payable for merchandise 800,000
Company's equity in assigned accounts is P500,000) Credit balances in Customers accounts 4,500,000
Trade installments
receivable due 1-18 months, 1,500,000 Cash received in advance from customers 200,000
Expected bad debts 100,000
including unearned finance charge of P50,000
Trade accounts receivable from 850,000-ok further analysis of the aged accounts
150,000
officers, due currently 150,000
A fter
Trade accounts on which
postdated checks are held that the allowance for doubtful receivable, it is determined
acounts should be
and no entries made P200,000.
were on receipt of checks 200,000 1. What is the net realizable value
Total
of accounts receivable?
8,200,000 a. 8,000,000
b. 8.500000
What amount should be reported as trade accounts receivable at C. 8,300.000
year-end? d. 8,550,000

a. 4,650,000 2. What amount should be reported as accounts

payable?
b. 4,700,000 a. 4,200,000
C. 4,150,000 b. 4,700,000
c. 4,500,000
d. 4,050,000 d. 4,800,000

Solution 16-8 Answer a Solution 16-9 Question I Answer b Question 2 Answer c

Accounts receivable - unassigned 2,000,000 Accounts receivable - customers

Accounts receivable -assigned 1,500,000 (7,800,000+400,000 postdated checks) 8,200,000

800,000 Allowance for doubtful accounts 200,000)
Trade installments receivable (850,000-50,000)
Trade accounts receivable-officers 500,000
Trade accounts receivable from officers 150,000
Accounts on which postdated checks are held 200,000 Net realizable value 8.500,000
Total trade accounts receivable 4,650,000
Accounts payable 4.500.000

212 213
 Problem 16-10 (IAA)
Solution 16-10
Von Company provided the
following data for the current year in relation
to accounts receivable: n Ouestion Answer b
Debits ccounts receivable January 1 560,000
January 1 balance after deducting credit balance of P30,000
Charge sales
5.250,000
Charge sales 530,000 A ccounts
w r i t t e n off but recovered
10,000
Charge for goods out consignment
on 5,250,000 5,820,000
Shareholders' subscriptions 50,000 Total

Accounts written off but recovered 1,000,000 Collections from customers

(5,150,000)
Cash paid to customer for January 1 credit balance 10,000 Writeoff 35,000)
Goods shipped to cover January 1 credit balance 25,000 Merchandise returns
25,000)
Deposit long-term contract
on 5,000 Allowance to customers for shipping damages 15.000)
Claim against common carrier 500,000
Advances to supplier 400,000 Accounts
receivable -

December 31 595,000
300,000
Credits receivable- January 1 530,000
Accounts
Collections from customers, încluding overpayment Credit balance of customer
30,000
of P50,000
Writeoff 5,200,000 Adjusted accounts receivable 560,000
Merchandise returns 35,000
Allowances to customers for shipping damages 25,000 Collections from customers 5.200,000
Collection on carrier claim 15,000
Collection on subscription S0,000 Overpayment C50,000)
200,000
1. What
Adjusted collections 5,150,000
amount should be reported as accounts receivable on
December 31? 2 Answer c
Question
a. 565,000
b. 595,000 Accounts receivable 595,000
C. 545,000 Claim receivable (400,000-50,000) 350,000
d. 495,000 Advances to supplier 300.000
2. What total amount of trade and otherreceivables should be reported
under current assets? Total trade and other receivables 1,245,000

a. 1,745,000 Question 3 Answer c

b. 2,045,000
C. 1,245,000 Subscriptions receivable (1,000,000-200,000) 800,000
d. 1,195,000 Deposit on contract 500,000
3. What total amountofother receivables should be reported under
noncurrent assets? Total long-term other receivables 1,300,000
a. 1,650,000
b. 1,150,000
1,300,000
1,600,000
214
215
 142321"

Problem 16-11 (1AA) Solution 16-11

Wonder Company provided the 1sactions affecting

following transactions affees:
Question1 Answera
accounts receivable during
the current year:
receivable
January
-

Accounts
1
Sales cash and credit
customers, all of
whom 5,900,000 Credit sales
950,000
Cash received from credit
took advantage of the
discount feature of the
Total 3,800,000
Cash received from credit customers
credit terms 4/10,n/30 3,024,000 Sales discounts
4,750,000
Cash received from cash
customers
2,100,000 Accounts receivable written off
(3,024,000)
Accounts receivable written
off as worthless 50,000 Sales returns and allowances
126,000)
Credit memorandum issued to credit
customers
50,000)
for sales returns and allowances 250,000 Accounts receivable - December 31 250,000)
for sales
Cash refunds given to cash customers 1,300,000
returns andallowances 20,000 Total sales
written off as 5,900,000
Recoveries on accounts receivable Cash received from cash
included in customers cash sales
uncollectible in prior periods not
Credit sales
2.100,000)
stated above
cash received from customers 80,000 3,800,000
Gross accounts receivable collected
Balances on January 1 (3,024,000/96%)
Sales discounts (4% x 3,150,000) 3,150,000
Accounts receivable 950,000 (126.000)
Allowance for doubtful accounts 100,000 Cash received from credit customers
3.024.000
The entity provided for doubtful account expense by crediting Gross amount
100%
allowance for doubtful accounts in the amount of P70,000 for the Cash discount (4/10 or 4% within 10 days) 4%
current year. Net amount 96%
1. What amount should be reported as accounts receivable on
Question 2 Answer b
December 31?
Allowance for doubtful accounts January 100,000
a. 1,300,000 Recovery of accounts written off 80,000
b. 1,426,000 Doubtful accounts expense for current year 70.000
c. 1,280,000
Total 250,000
d. 1,220,000 Accounts written off 50.000)
2. What amount should be reported as allowance for doubtful accounts Allowance for doubtful accounts- December 31 200,000
onDecember31?
a. 120,000
b. 200,000
c. 250,000
d. 170,00

216 217
 Solution16-12

Adapted)
Problem 16-12 (PHILCPA

started business at the beginning

of current vea. Ouestion I Answer
Germany Company allowance for doubtrul estimateda
accounts
ed at available for sale
The entity established an wrote offP50,000 of Goods 9,000,000
sales. During the year,
the entity Ending inventory
1500.000)
credit
5% of
uncollectible accounts. sold
Cost
ofgoods Z.500.000
that merchandise purchased amounted to
Further analysis showed Ouestion2 A n s w e r d
inventory was P1,500,000. Goode
P9,000,000 and endingmerchandise
sold at 40% above cost. goods sold 7,500,000
were Cost of
on cost (40% x 7,500,000) 3,000,000
S0% sales on account and 20% cash sales. Markup
The total sales comprised
cash sales, amounted to 10,500,000
Total collections from customers, excluding
Total sales

Cash sales (20% x 10,500,000) (2,100,000)

P6,000,000.
Sales on account 8,400.000
1. What amount should be reported
as cost ofgoods sold?
Ouestion3 Answer a
a 7,500,000
b. 5,400,000 8,400,000
Sales on account
c. 3,600,000 (6,000,000)
Collections
Accounts written off 50.000)
d. 6,900,000
receivable -December 31 2.350,000
Accounts
2. What amount should be reported as sales on account?
accounts (8,400,000 x 5%) 420,000
a. 10,500,000 Provision for doubtful
Accounts written off
50.000
b. 18,750,000
C.12,000,000 accounts- December 31 370.000
Allowance for doubtful
d. 8,400,000 2,350,000
Accounts receivable
370,000)
3. What is the net realizable value of accounts receivable at Allowance for doubtful accounts

year-end?
Net realizable value 1.980.000
a. 1,980,000
b. 2,350,000
C. 1,930,000
d. 2,400,000

218 219
 142321 9356089243537 O

Problem 17-2 (lAA)

CHAPTER 17 Company
Roanne Co used the allowance
method of accounting for
uncollectible accounts.

During the current year, the entity had

wrote otf accounts charged P800,000 to bad debt
ESTIMATION OF DOUBTFULACCOUNTO kpense and
uncollectible.
receivable of P900,000 as
What was the decrease in working capital?

Problem 17-1 (AICPA Adapted) a.

900,000
h.
b. 800,000
Orr Company prepared an aging receivable on
of accounts 100,000
C.
determined that the net real1zable value of the
December 31 and d.
accounts receivable was P2,500,000. Solution 17-2 Answerb
1 280,000
Allowance for doubtful accounts on January Only the bad debt expense decreases working capital.
Accounts written off as uncollectible 230,000
Accounts receivable on December 31 2,700,000 The writeoftfdoes not aftect anymore the working capital because the
50,000 effect is offsetting on current assets.
Recovery of accounts written off
Problem 17-3 (AICPA Adapted)
What amount should be recognized as doubtful accounts expense for
the current year? Mill Company's allowance for doubtful accounts was P1,000,000
and P900,000 at the end of 2021.
at the end of 2022
a. 230,000 doubtful
For the year ended December 31,2022, entityreported
the
b. 200,000 accounts expense of P160,000 in the income statement.
C. 150,000 account to write off
d. 100,000 What amount was debited to the appropriate
uncollectible accounts in 2022?
Solution 17-1 Answerd a. 60,000
Allowance for doubtful accounts -

January 1 280,000 b. 100,000

off 50,000 C. 160,000
Recovery of accounts written d. 260,000
Doubtful accounts expense (SQUEEZE) 100,000
Total 430,000
Solution 17-3 Answer a
Accounts written off ( 230,000) December 31, 2021
900,000
Allowance for doubtful
accounts
-

160,000
Allowance for doubtful accounts -

December 31 200,000 Doubtful accounts expense

1,060,000
(60,000)
Since the December 31 accounts receivable balance is P2,700,000
Total
Accounts written off (SQUEEZE) 1,000,000
2022
and the net realizable value is P2,500,000, the December 31 allowance accounts-
December 31,
for doubtfül accounts should be P200,000. Allowance for doubtful

from
The doubtful accounts expense is "squeezed" by working back
the December 31 allowance for doubtful accounts of P200,000.
221
220
 Problem 7-5 (AICPA Adapted)
Problem 17-4 (AICPA Adapted)
following
information ing to
pertaining to accounts
ac. Marian
a n Co,
Company used the allowance method of
Tara Companyprovidedthe
receivable at year-end:
doubtful accounts.
accounting for
Days outstanding
Amount Uncollectible The folloWing summary schedule was prepared from
60
1,200,000 5%
10%
a c c o
nts receivable outstanding on December an
aging of
900,000 31
61- 120 Number of days
Over 120
1,000,000 20%
acoo outstanding Amount Probability
the entity wrote offP100,000 in of collection
During the current year, that had been written offin i s 0-30 days
receivable and recovered P50,000 31 60 days
5,000,000 .98 lok
year, the allowance for do tful 2,000,000
years. At the beginning ofcurrent Over 60 days 90
accounts was P150,000. A )Y - 1,000,000 BO
amount of allowance for doubtfl The following additional information is available
1. Under the aging method, what
at year-end?
for the current year: toi
accounts should be reported Net credit sales
for the year
40,000,000
a. 150,000 Allowance for doubtful accounts:
b. 200,000 Balance, January 1
Balance before adjustment, December 31
450,000 (cr)
. 500,000 20,000 (dr
d. 350,000
Which amount should be recognized as doubtful accounts expense The entity based the estimate of doubtful accounts on the aging of
2.
accounts receivable.
for the year?

450,000 What amount should be recognized as doubtful accounts expense for

b. 250,000 thecurrent year?
C. 200,000
d. 300,000 a. 470,000
Solution 17-4 Question I Answerd Question 2 Answerb b. 480,000
C. 500,000
60 (1,200,000 x5%) 60,000 d. 520,000
61 120 (900,000 x 10%) 90,000
Over 120 (1,000,000 x 20%) 200,000
Solution 17-5 Answer d
Allowance for doubtful accounts - December 31
350,000
0-30 days (5,000,000 x 2%) 100,000
Under the aging method, the computed represents the
amount
required ending allowance for doubtful accounts.
31 60 days (2,000,000 x 10%) 200,000
Over 60 days (1,000,000 x20%) 200,000
Allowance - beginning
150,000 Required allowance December 31 S00,000
Recovery
-

Doubtful accounts expense 50,000 Add: Debit balance in allowance 20,000

($QUEEZE) 250,000
Total Doubtful accounts expense 520,000
Writeoff 450,000
100,000
Allowance - ending
350,000

222 223
 Problem 17-6 (AICPA Adapted) Solution 17-6

Delta Company
sold goods to
wholesalers
on terms 2/15, net 2c
0. The
cash sales but 50%
of the customer. took advanta Question Answera
entity had no
discount is 2% if accounts
the discount. The are paid in 15 days.
method of recording sales and
The entity used the gross
accas
ounts Thu: of the total accounts recevable, only the
days" category is still subject to cashofdiscount.
P2,000,000
amount
receivable. with the 0-15
An analysis of the trade accounts receivable at year-end revealeiane The available discount is 2% times P2,000,000 or P40,000.
following dince. only 50% of the customers took
Si advantage of
Age
Amount Collectible
the cash discount to be recognized is 50% of P40,000theor discount,
P20,000.
0 15 days 2,000,000xo2 40100% The journal entry to record the sales discount is:
1,400,000 95% O k
16 3 0 days
90% Oie Sales discount
31 60 days 400,000 20,000
Over 60 days 200,000 ont S 0% 3 Allowance for sales discount
20,000
4,000,000 2 Answer b
Ouestion
1. What amount should be reported as allowance for sales discount 16 3 0 days (1,400,000 x 5%) 70,000
at year-end?
31 60 days 400,000 x 10%6) 40,000
Over 60 days 200,000 x 50%) 100,000
a. 20,000
Allowance for doubtful accounts
210,000
b. 32,400
c. 33,500
d. 40,000 Question 3 Answer c

Accounts receivable 4,000,000

2. What amount should be reported as allowance for doubtful accounts Allowance for sales discount 20,000)
at year-end? Allowance for doubtful accounts 210,000)

a. 230,000 Net realizable value 3,770,000

b. 210,000
C. 190,000
d. 200,000

3. Whatis the net realizable value of accounts receivable at

year-end
a. 4,000,000
b. 3,750,000
C3,770,000
d. 3,790,000
M
224 225
 Problem
17-8 (AICPA Adapted)
Problem 17-7 (AICPA Adapted)
abstractea he heginning of current year,
Manchester Company provided
the following accounts
ted Atth Jamin Company had a credit balance
of260,000 in the allowance for uncollectible accounts. Based on past
trial balance at year-end:
from the unadjusted 2%of credit sales would be uncollectible.
experience,
Debit Credit
the entity wrote
Accounts receivable
5,000,000 Duringtthe current year, offP325,000 of uncollectible
40,000 counts. Credit sales for the yeartotaled P9,000,000.
accounts
Ailowance for doubtful
Net credit sales 20,000,000
What amount should be reported as uncollectible accounts expense
accounts receivable will become for the year?
The enty estimated that 3%ofthe gross
uncollectible.
a. 325,000

What amount should be recognized

as doubtful accounts expense b. 180,000
c. 440,000
22
for the current year? 65,000
d.

a. 110,000 should be reported as allowance for uncollectible

2. What amount
b. 150,000 accounts at year-end?
c. 190,000
a. 115,000
d. 600,000
b. 180,000
c. 245,00
Solution 17-7 Answer c d. 440,000
accounts at year-end
allowance for doubtful
Required 150,000
(3%x 5,000,000) Solution 17-8

receivable method is used, the amount

If the percentage ofaccounts allowance for doubtful Question 1 Answer b
the required ending
computed represents 180,000
accounts.
Uncollectible accounts expense (2% x 9,000,000)
is determined as follows: amount computed already
The doubtful accounts expense Under the percentage ofsales method, the
150,000 represents the uncollectible accounts expense.
Allowance for doubtful accounts at year-end 40,000
allowance account before adjustment
Add: Debit balance in Question 2 Answer a
190,000
260,000
Doubtful accounts expense
Allowance for uncollectible accounts-January 180,000
Uncollectible accounts expense (325,000)
Accounts written off
Allowance for uncollectible accounts-December 31 115,00

227
226
 17-9 (AICPA Adapted)
Problem Problem 17-10 (AIC Adapted)
Ladd Company provided the
following data for the currennt
year Effective with
ie the current year, Hall
Alowance for doubtful accounts
January 1 Company adopted anew accounting
9,5180,
00,000000
-

for estimating the allowance for

Sales
method

by the year-end aging of

doubtful accounts at the amou.tt
Sales returns and allowances 800,000
indicated
accounts receivable.
Sales discounts
200,000 Allowance fordoubt accounts, January
Accounts written offas
uncollectible

pense
200,000
for doubtful accounts expense at the rate of so
Provision for doubtfu accounts during the current
1

year
250,000
The entity provided 5% of at 2% of credit sales of P10,000,000
net sales. Accounts written off 200,000
doubtful accounts exnens. 205,000
Estimated uncollecti accounts per aging
. What amount should be reported as pense? on December 31 220,000
a. 435,000 What amount should be reported as doubtful accounts expense for
b. 425,000 current year?
c. 475,000
d. 415,000 a. 220,000

2. What amount should be reported as allowance for doubtful accons nts b. 205,00o
on December 31? C. 200,000
d 175,000
a. 415,000
b. 425,000
g:0k
C. 405,000 Solution 17-10 Answer d
d. 605,000
Allowance for doubtful accounts Januaryy 1 250,000
-

Solution 17-9 Doubtful accounts expense (SQUEEZE) 175,000

Question l Answer b Total 425,000
Accounts written off (205.000)
Sales 9,500,000
Sales returns and allowances 800,000) Allowance for doubtful accounts -

December 31 220,000
Sales discounts 200,000)
Correct doubtful accounts expense 175,000
Net sales 8.500.000 doubtful accounts expense 200,000
Recorded
Doubtful accounts expense (5% x 8,500,000) 425,000 25,000)
Overstatement of doubtful acounts expense

Under the percentage of sales method, the amount computed Adjustingjournal entry
represents the doubtful accounts expense.
25,000
Question 2 Answer c Allowance for doubtful accounts
25,000
Doubtful accounts expense
Allowance for doubtful accounts-January 1 180,000
Doubtful accounts expense 425,000
Accounts written off (200,000)
Allowance for doubtful accounts- December 31 405,000

229
228
 Problem 17-11 (AICPA
Adapted)
1
what is the allowance for doubtful accounts
on December
2021? 31,
carried no allowance
From inception of operations, Axis Company for
a. 20,000
doubtful accounts.
b. 21,250
as written offand recoveria c. 22,500
Uncollectible accounts were expensed eri es
income as collected. d. 25,000
were credited to

that the accounting polieu

During 2022, management recognizednot correct and What is the allowance for doubtful accounts on
accounts was determined. 2022?
December 31,
with to doubtful
respect
accounts was necessary.
that an allowance for doubtful
a. 32,000
A policy was established to maintain an allowance for doubtful b. 34,000

accounts based on historical bad debt loss percentage applied to c. 36,000

year-end accounts receivable. d. 40,000

The historical bad debt loss percentage

is to be recomputed each 3. What amount should be reported as doubtful accounts expense
based on all available past years up to a maximum of five years. for 2022?
year

Year Credit sales Writeoffs Recoveries a. 97,000

15,000 1e 0 b. 78,000
2018 1,500,000
38,000 ,700 c. 83,000
2019 2,250,000
2020 2,950,000 52,000 ,500 d. 92,000
2021 3,300,000 65,000 4,800
2022 4,000,000 83,000 5,000

Balances of accounts receivable

December 31, 2021 1,250,000

December 31, 2022 2,000,000

230 231
 9B50090

Solution 17-11
Problem 1 7 2 (PHILCPA Adapted)
Ouestion l Answer a

Credit sales Writeoffs January 1,2021, Easy Company

Year
Recoveries On
reported accounts
000 and allowance for doubtful receivable
2018 1,500,000 15,000 accounts P100.0
acCounts
2019 2,250,000 38,000 ntity provided
the following
data: P100,000. The
52,000
2,700 Credit sales
2020 2,950,000 2,500 Writeoffs
2021 3.300,000 65,000 Recoveries
4,800 2018 11,000,000 250,000 20,000
Total 10,000,000 170,000 13,000,000 305,000
10,000 2019

14,000,000 35,000
2022 4.000,000 83.000 5.000 2020
300,000
15,000,000 40,000
2021 200,000
Total 14,000,000 253,000 15,000 50,000
The collections from customers during 2021 totaled P14,000,000,
excluding recoveries.
Rate in 2021 170,000-10,000 .016
10,000,000 noubtful accounts are provided for as apercentage of credit
Rate in 2022 =253,.000-15,000 017
sales
The entitycalculated the percentage annually by
using experience
the
14,000,000 of the three years prior to the current year
1. What amount should be reporied as doubtful accounts
Allowance - December 31, 2021 (1,250,000 x .016)
20000 2021? expense f

Question 2 Answer b a. 200,000

b. 300,000
Allowance- December 31, 2022 (2,000,000 x .017) 34,000 c. 400,000
Question 3 Answer d
d. 250,000
2. What amount should be reported as allowance for doubtful
Allowance-December 31, 2021 20,000 accounts on December 31, 2021?
Recoveries in 2022 5,000
Doubtful accounts expense for 2022 (SQUEEZE) 92.000 a. 250,000
Total b. 400,000
117,000
Writeoffs in 2022 C. 300,000
(83,000)
d. 450,000
Allowance- December 31, 2022 34.000
3. What is the net realizable value ofaccounts receivable on December
The doubtful accounts expense is "squeezed" from the December 31, 31, 2021?
2022 required allowance for doubtful accounts.
a. 2,550,000
b. 2,600,000
C. 2,750,000
d. 2,800,000

232 233
 Solution 17-12 roblem 17-13 (AICPA Adapted)

Question 1 Answer b company

Horus Con
provided
for doubtful
accounts expense
3% ofcreditsales. The balance monthly
Credit sales Writeoffs
Recoveries in the allowance for doubtful
250,000 accounts was P1,000,000 on January 1,2021.
2018 11,000,000 20,000
13,000,000 305,000 35,000 sales totaled
2021, credit s
Dubtful accounts were madeP20,000,000,
2019 interim provisions
2020 14,000,000 300,000 40,000 at 3% of credit
855,000 ritten
ounts were writ sales, P200,000
off, and recoveries of accounts
38,000,000 95,000
writtenoff amounted to P50,000. previously
855,00095,000
An aging of accounts receivable was made on December
Rate .02 31,2021.
38,000,000 60 days 6,000,000 10% uncollectible
61 180 days 2,000,000 20% uncollectible
Doubtful accounts expense for 2021 360 days 1,500,000
181 30% uncollectible
(2% x 15,000,000 2021 credit sales) 300,000 More than
one year 500,000 S0% uncollectible

Question 2 Answer a 10.000.000

Allowance for doubtful accounts - January 1, 2021
100,000 Based on the review of the "more than one year" category, additional
Doubtful accounts expense for 2021 300,000 acCOunts of P100,000 are to be written off on December 31, 2021.
Recoveries in 2021 50,000 1. What amount should be reported as doubtful accounts expense for
Total 450,000 the current year?
Writeoffs in 2021
(200,000) a. 2,250,000
Allowance for doubtful accounts - December 3 1, 2021
250,000 b. 1,650,000
900,000
Question 3 Answer a d. 850,000
Accounts receivable - January 1, 2021 2. What is the year-end adjustment to the allowance for doubtful
2,000,000
Credit sales in 2021 15,000,000 accounts on December 31, 2021?
Collections from customers in 2021 (14,000,000) a. 900,000 debit
Writeoffs in 2021 200.000) b. 900,000 credit
Accounts receivable - December 31, 2021 c. 300,000 debit
2.,800,000 d. 300,000 credit
The amount of recoveries in 2021 is
ignored because the effect of the 3. What is the carrying amount of accounts receivable on December
recharging and subsequent collection is offsetting on accounts receivable. 31,2021?
Accounts receivable December 31, 2021
-

a. 9,900,000
2,800,000
Allowance for doubtful accounts- December b. 8,250,000
31, 2021 250,000)
Net realizable value C. 7,650,000
2,550,000 d. 8,450,000

234 235
 P r o b l e m
17-14 (AICPA Adapted)
Solution 17-13

Question I
Answer c Sigma
a Co. Company began operations January 1, 2021.
on
On
10% 31,2021, the entity provided for doubtful
60 days (6,000,000 x 600,000 December
ofannual
credit sales.
accounts based
61 180 days (2,000,000 x 20%
400,000 on
1%

181 -

360 days (1,500,000 x 30%

100,000 x50%)
450,000 1,2022,
11ary 1, 2022 the
More than one year (500,000- 200,000 on January
On entity changed the method of
for doubtful accounts by determining
December 31, 2021
allowance
Required allowance -

1,650,000 aging of accounts receivable.

January 1, 2021 1,000,000 past invoice date
Percent uncollectible
Allowance for doubtful accounts- Days
Recoveries 50,000 0 30
Doubtful accounts expense (SQUEEZE) 900,000 31 90
Total 1,950,000 91- 180
20
Accounts written off (200,000+
100,000) 300,000) Over 180
80
December 31, 2021
Allowance for doubtful accounts
-

1,650,000
In addition, the entity wrote off all accounts receivable that were
The doubtful accounts expense is "squeezed" by working back from
m over 1 year old.
the allowance for doubtful accounts on December 31, 2021.
The entity provided the following additional information:
Question 2 Answer d

Correct doubtful accounts expense 900,000 2022 2021

Recorded doubtful accounts expense (3% x 20,000,000) 600,000 Credit sales 3,000,000 2,800,000
Increase in doubtful accounts expense 300,000 Collections, including recovery 2,915,000 2,400,000
Accounts written off 27,000 none

Adjusting entry Recovery of accounts previously

written off 7,000 none
Doubtful accounts expense 300,000
Allowance for doubtful accounts 300,000
Days past invoice date at December 31
Note that the allowance for doubtful accounts is credited. 0 30 300,000 250,000
31 90 80,000 90,000
Question 3 Answer b
91 180 60,000 45,000
Accounts receivable - December 31, 2021 Over 180 25,000 15,000
(10,000,000-100,000 to be written off) 9,900,000
Allowance for doubtful accounts December 31, 2021
-

L,650,00)
Net realizable value
8,250,000
The carrying amount of accounts receivable
realizable value.
is equal to the net

236 237
 Solution 17-14
1. What is the allowance for doubtful accounts on December a
er 31,
2021? Ouestion Answer a
a. 28,000
Allowance
for loubtful accounts December 31, 2021
b. 24,000 (1% x 2,800,000)
C. 26,000 28,000
d. 0 n e there are no accounts written off and
recovery of accounts written
offduring 2021, he amount fP28,000 isthe doubtful accounts
2. What is the allowance for doubtful accounts on December 31 C2021 and also the allowance balance on expense
2022? December 31,2021.
Accounts receivable - December 31, 2021
a. 30,000
b. 39,000 30 (250,000 x 1%)
C. 29,150 2,500
31 90 90,000 x 5%)
4,500
d. 27,000 91 180 ( 45,000 x 20%) 9,000
Over 180 (15,000 x 80%) 12,000
3. What amount should be reported as doubtful accounts expense for allowance December 31, 2021
2022?
Required 28,000

a. 39,000 Question 2 Answer b

b. 31,000 30 (300,000 x 1%)
0 3,000
c. 38,000 31 90 80,000 x 5%) 4,000
d. 11,000 91-180 (60,000 x20%) 12,000
Over 180 ( 25,000 x 80%) 20,000

Required allowance
-

December 31, 2022 39,000

Question 3 Answerb

Allowance - December 31, 2021 28,000

Recovery in 2022 7,000
Doubtful accounts expense for 2022 (SQUEEZE) 31,000

Total 66,000
Writeoff in 2022 (27,000)
December 31, 2022 39,000
Required allowance -

The doubtful accounts expense for 2022 is "squeezed" by working

doubtful accounts on
Dack from the required allowance for
December 31, 2022.
239
238
Problem 17-15 (AICPA Adapted) Solution 17-15

Flappable Company began operátions on January 1,2018. The enti Ouestion

1 Answer a
provided for doubtful accounts based on 5% of annual credit sala less
prior years. On January 1, 2021, the entity changed the method 30 days
or
(3,000,000x 5%) 150,000
detemining the allowance for doubtful accounts using an aging Between 3I and 60 days (1,500,000x 20%) 300,000
schedule Between 61 and
180 days
(1,200,000x 25%)
|81 and one year 300,000
2021 2020 2019 Between (1,200,000 x 50%) 600,000
Credit sales
2018 for doubtful accounts -December 31, 2021
15,000,000 9,500,000 8,000,000 6,000.00n
Allowance

1,350,000
Collections excluding recovery 11,700,000 8,200,000 6,700,000
Accounts written off during year
4,s000,0000 Question 2
Answer
a
200,000 120,000 80,000
Recovery of accounts written off 100,000 40,000 None
35,000 None Doubtful accountsexpense 2018, 2019 and 2020
Days Account Outstanding (5% x 23,500,000)
Amount Probability of Collection 1,175,000
Accounts written off2019 and 2020 (200,000)
30 days or less 3,000,000 959% Recovery of accounts written off2019 and 2020
Between 31l and 60 days 1,500,000 75,000
80%
Between 6 l and 180 days 1,200,000 75% Allowance for oubtful accounts-January 1,2021 1.050,000
Between 181 and one year 1,200,000 50%
Over one year-to be written off 100,000 0% 2018 6,000,000
2019 8,000,000
1. What amount should be reportedas allowance for doubtful accounts 2020
9,500,000
on December 31, 2021?
Total credit sales in prior years
23,500,000
a. 1,350,000
b. 1,450,000 Allowance for doubtful accounts- January 1, 2021 1,050,000
Recovery of accounts written off 2021
C. 1,250,000 100,000
Doubtful accounts expense for 2021 (SQUEEZE) 500.000
d. 1,000,000
Total 1,650,000
2. What amount should be reported as doubtful accounts expense for Writeoffs (200,000+100,000 additional) 300,000)
2021?
Allowance for doubtful accounts- December 31, 2021 1350,000
a. 500,000
b. 600,000 Question 3 Answer c
c. 700,000 Accounts receivable - December 31, 2021
6,900,000
d. 400,000 Allowance for doubtful accounts-December 3 1,2021 (1,350,000)
Net realizable value 550,000
3. What is thenet realizable value of accounts receivable on December
31, 2021? 30 days or less 3,000,000
a. 6,900,000 Between 31 and 60 days 1,500,000
b. 7,000,000 Between 61 and 180 days 1,200,000
c. 5,550,000 Between 181 and one year 1,200,000
Over one year to be written off
d. 5,650,000
Total accounts receivable 6.900,000

240 241
Problem 17-16 (AICPA Adapted) Solution 17-16

Sky Company provided the following infomation at year- Ouestion Answera

2022 ce for doubtful accounts- December 31, 2021
2021 llowance 1 15,000
expense for 2022
Accounts receivable 880,000 800,000 Doubtful
accounts
30,000
Allowance for doubtful accounts 10,000) 15,000) 45,000
Total
Allowance for sales returns 20,000) 25,000) Allowance for doubtful accounts- December 31, 2022 (10,000)
Net realizable value 850,000 off in 2022
760,000 Accounts
written 35,000

The entity reported doubtful accounts expense in 2022 of P30,000

Ouestion 2 Answer
c
and had products returned for credits totaling P15,000 at sales price.
Gross sales for 2022 anmounted to P6,150,000. December 31, 2021
Accounts receivable -

800,000
1. What amount of accounts receivable was written during 2022? Gross sales 6,150,000
Total 6,950,000
a. 35,000 Accounts
receivable- December 31, 2022 880,000)
b. 30,000 Accounts written off in
2022 35,000)
C. 15,000 Sales returns actual 15,000)
d. 10,000
Collections from customers in 2022 6,020,000
2. What amount was collected from customers during 2022?
Question 3 Answera
a. 6,035,000
b. 6,070,0000 Allowance for sales returns
-

December 3I, 2021 25,000

C. 6,020,000 Estimated sales returns (SQUEEZE) 10,000
d. 6,100,000
35,000
Total
3. What amount was recorded as estimated sales returns during 2022? Actual sales returns (15,000)
Allowance for sale returns
-

December 31, 2022 20,000

a. 10,000
b. 15,000
Question 4 Answer b
C. 20,000
d. 5,000 6,150,000
Gross sales
Estimated sales returns in 2022 10,000)
4. What amount was reported as net sales for 2022?
6,140,000
Net sales in 2022
a. 6,150,000
b. 6,140,000
c. 6,100,000
d. 6,135,000

242 243
 oblem 16-5 (AIC: Adapted)
Problem 16-4 (AICPA Adapted)
Faith Company provided the
following information relating to curen Company provided the following
Steven Con

operations: ent year o foperations:

information during the first
Accounts receivable, January 1
Total mercha purchases for the year
Accounts receivable collected 4,000,000 erchandis inventory on December 3 1 7,000,000
Cash sales 8,400,000 1,400,000
Inventory, January 1 2,000,000 Collections from customers
4,000,000
Inventory, December 31 4,800,000
Purchases 4,400,000 All merchandis was marked to sell at 40% above cost. All sales
Gross margin on sales 8,000,000 a n a Credit basis and all receivables are collectible.
4,200,000
What amount should be reported as accounts receivable on
What amount should be reported as accounts receivable on
31?
December December 31?

a. 8,200,000 a. 1,000,000
b. 6,200,000 b. 3,840,000
c. 2,000,000 c. 5,000,000
d. 4,200,000 d. 5,800,000

Solution 16-4 Answer b Solution 16-5 Answer b

Inventory- January 1 4,800,000
Purchases Purchases 7,000,000
8,000,000 Inventory December 31 (1,400,000)
Goods available for sale 12,800,000
December 31
Cost of goods sold 5,600,000
Inventory -

(4.400,000) Markup on cost (40% x 5,600.000) 2,240,000

Cost of goods sold 8,400,000
Sales (140% x 5,600,000) 7,840,000
Gross margin on sales 4,200,000
Collections from customers (4,000,000)
Gross sales 12,600,000
Accounts receivable - December 31 3,840,000
Cash sales (2,000,000)
10,600,000 Sales ratio %
Credit sales (100%+40%)
Accounts receivable -

January 1 4,000,000
14,600,000
Total
Accounts receivable collected (8,400,000)
6,200,000
Accounts receivable -
December 31

209
208