Professional Documents
Culture Documents
CHAPTER 3 - RECEIVABLES
Question no. 7
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.
p.
Accounts Receivable
Receivables from Employees (part of non-trade receivables) current assets
Advances to Suppliers Current assets
Accounts Receivable
Customers Accounts with Credit Balances Current Liabilities
Cost of merchandise must be included in inventories
Accounts Receivable
Subscriptions Receivable current asset if collectible within 12 months;
otherwise, non-current asset
Other Non-Trade Receivables Current asset or non-current asset depending on
terms of payment
Advances to Suppliers Current Assets
Suppliers Accounts with Debit Balances or Advances to Suppliers Current assets
Accounts Receivable
Claims for Income Tax Refund Current Assets
Accounts Receivable, amount of loan presented separately as part of liabilities
Accounts Receivable
Not recognized anymore (for write off)
PROBLEMS
3-1
(Ginoo Company)
Gross Method
(Correction to the Text: Delete the second transaction on Dec. 10: Collected from
First Lady in full.)
Dec.
Accounts Receivable-First Lady
68,400
9
Sales
68,400
80,000 x 90% x 95%
10
50,000
Cash
Sales Discounts
Accounts Receivable-First Lady
67,032
1,368
26
40,000
31
Sales Discounts
Allowance for Sales Discounts
19
Jan. 5
50,000
68,400
800
800
Cash
Allowance for Sales Discounts
Accounts Receivable-Teens Kingdom
39,200
800
Cash
Accounts Receivable-Mens World
50,000
10
40,000
40,000
50,000
Chapter 3 Receivables
Net Method
Dec.
Accounts Receivable-First Lady
9
Sales
68,400 x .0.98
10
67,032
49,000
19
Cash
Accounts Receivable-First Lady
67,032
26
39,200
31
Cash
Accounts Receivable-Mens World
Allowance Method
Dec.
Accounts Receivable-First Lady
9
Allowance for Sales Discount
Sales
10
Dec.
19
26
31
Jan. 5
1,000
50,000
1,368
68,400
800
39,200
1,000
1,000
39,200
800
Cash
Accounts Receivable-Mens World
50,000
40,000
50,000
10,000
10,000
12,000
11
1,000
49,000
40,000
Cash
Allowance for Sales Discount
Accounts Receivable-Teens Kingdom
Notes Receivable
Sales
50,000
1,368
67,032
67,032
1,000
39,200
68,400
Cash
67,032
39,200
50,000
(Colayco Company)
(1)
July Allowance for Doubtful Accounts
14
Accounts Receivable-Moret Co.
31
49,000
3-2
67,032
12,000
Chapter 3 Receivables
Aug.
15
Nov.
1
Nov. 4
5
Nov. 9
Nov.
15
15
Dec.
13
Cash
20,000
Notes Receivable
Sales
15,000
Cash
19,200
800
20,000
12,300
12,000
300
9,000
Cash
Credit Card Service Charge
Accounts Receivable-Credit Card
5% x 9,000 = 450
Accounts Receivable-Moret Co.
8,550
450
9,000
9,000
10,000
10,000
Cash
Accounts Receivable-Moret Co.
10,000
Cash
15,600
10,000
Notes Receivable
Interest Income
15,000 x 12% x 120/360 = 600
3-3
35,000
15,000
600
(Format Company)
a.
P 591,768
b.
Carrying value, January 1, 2009
P3,945,120
Add amortization of discount during 2009
Carrying value, December 31, 2009
(or simply P3,945,120 x 1.15 = P4,536,888)
3-4
(Formatted Company)
a.
Carrying value of the note on January 1, 2009 (P2 M x 2.28323)
P4,566,460
12
591,768
P4,536,888
Chapter 3 Receivables
Interest rate
Interest revenue for 2009
15%
P 684,969
P3,251,429
15%
P 487,714
b.
Carrying value, January 1, 2009
P4,566,460
Add amortization of discount during 2009
Less first payment of principal
(2,000,000)
Carrying value, December 31, 2009
3-5
684,969
P3,251,429
(HRV Company)
(FX Corporation)
a.
2009
Jan. 1
Notes Receivable
Accumulated Depreciation
Loss on Sale of Equipment
Equipment
Discount on Notes Receivable
100,000
420,000
8,820
500,000
28,820
b.
2009
Dec. 31
2010
Dec. 31
2011
Dec. 31
Dec. 31
3- 7
8,542
9,567
10,711
8,542
9,567
10,711
100,000
100,000
13
Chapter 3 Receivables
2.5 M + (5% x 7.5 M) = 2,875,000 x
P2,566,972
2.5 M + (5% x 5.0 M) = 2,750,000
2,192,273
2.5 M + (5% x 2.5 M) = 2,625,000
1,868,422
Total
or
2.5 M x 2.40183
(5% x 7.5 M) x
(5% x 5.0 M) x
(5% x 2.5 M) x
Total
a.
Amortization Table
01/01/09
12/31/09
12/31/10
12/31/11
0.79719
0.71178
P6,627,667
P6,004,575
334,822
199,298
88,972
P6,627,667
0.89286
0.79719
0.71178
Payment of
Principal
Date
0.89286
2,500,000
2,500,000
2,500,000
Interest
Paid
375,000
250,000
125,000
Interest
Revenue
795,320
545,758
281,255*
Amortizatio
n of
Discount
420,320
295,758
156,255*
Carrying
Value
6,627,667
4,547,987
2,343,745
------------
*rounded off
b.
Journal entries
2009
Jan. 1
Notes Receivable
7,500,00
0
872,333
627,667
6,000,00
0
Dec. 31
Cash
Discount on Notes Receivable
Interest Revenue
Notes Receivable
2,875,00
0
420,330
795,320
2,500,00
0
2010
Dec. 31
Cash
Discount on Notes Receivable
Interest Revenue
Notes Receivable
2,750,00
0
295,758
2011
Dec. 31
Cash
Discount on Notes Receivable
14
2,625,00
0
156,255
545,758
2,500,00
0
Chapter 3 Receivables
Interest Revenue
Notes Receivable
3.9
281,255
2,500,00
0
2.5 M x 2.4018
(18% x 7.5 M) x
(18% x 5.0 M) x
(18% x 2.5 M) x
Total
0.8929
0.7972
0.7118
P3,437,665
2,710,480
2,099,810
P8,247,955
P6,004,500
1,205,415
717,480
320,310
P8,247,705*
0.8929
0.7972
0.7118
Amortization Table
Payment of
Principal
Date
01/01/09
12/31/09
12/31/10
12/31/11
2,500,000
2,500,000
2,500,000
Interest
Paid
1,350,000
900,000
450,000
Interest
Revenue
989,755
646,525
315,765*
Amortizatio
n of
Premium
360,245
253,475
134,235*
Carrying
Value
8,247,955
5,387,710
2,634,235
------------
Journal entries
2009
Jan. 1
Notes Receivable
Premium on Notes Receivable
Gain on Sale of Land
7,500,00
0
747,955
Land
8,247,955 7,500,000 = 747,955 Premium
8,247,955 6,000,000 = 2,247,955 Gain
2,247,95
5
6,000,00
0
2009
Dec. 31
Cash
Premium on Notes Receivable
Interest Revenue
Notes Receivable
3,850,00
0
2010
Dec. 31
Cash
3,400,00
15
360,245
989,755
2,500,00
0
Chapter 3 Receivables
0
Premium on Notes Receivable
Interest Revenue
Notes Receivable
253,475
646,525
2,500,00
0
2011
Dec. 31
Cash
2,950,00
0
134,235
315,765
2,500,00
0
(Word Company)
Bad Debts Expense
Allowance for Bad Debts
P52,000
50,000
(Edit Company)
Allowance for Uncollectible Accounts, beg
Recovery of accounts previously written off
3,000
48,000
3-11
P 6,000
(12,000)
P45,000
Accounts Receivable
Sales
4,800,000
b.
Cash
Sales Discounts
Accounts Receivable
3,920,000
80,000
c.
d.
e.
4,800,000
4,000,000
20,000
20,000
Accounts Receivable
Allowance for Uncollectible Accounts
5,000
Cash
Accounts Receivable
5,000
Notes Receivable
Accounts Receivable
25,000
5,000
5,000
16
25,000
Chapter 3 Receivables
h.
i.
Cash
Notes Payable-Bank
400,000
Cash
Accounts Receivable
150,000
Notes Payable-Bank
Cash
150,000
400,000
150,000
150,000
65,000
65,000
j.
Interest Receivable
Interest Revenue
250
250
Accounts Receivable
(450,000+4,800,0004,000,00020,00025,000150,000)
P1,055,000
Less Allowance for Uncollectible Accounts
59,000
(Rav, Inc.)
3,000
15,000
19,000
P 337,000
P18,000
5,000
23,000)
( 11,000)
(
6,000)
P 200,000
P 12,000
11,000)
P
337,000
1,500,000
3,000
17
Collections
Cash discounts
Write off
Sales returns
1,600,000
23,000
11,000
6,000
Chapter 3 Receivables
Total
Balance, end
1,840,000
200,000
Total
1,640,000
3-13
Write off
11,000
Total
11,000
Balance, beg
Recovery
Impairment
Total
Balance, end
12,000
3,000
15,000
30,000
19,000
(Revo Company)
Allowance for Uncollectible Accounts, January 1, 2009
34,000
7,000
P
( 47,000)
3-14
P654,000
53,600
P600,400
(Adventure Company)
a.
P 1,200,000
10,000,000
(8,720,000)
20,000
( 400,000)
( 100,000)
P 2,000,000
P 2,000,000
600,000
P 1,600,000
P 190,000
100,000
(
20,000)
(
60,000)
P 210,000
c.
Accounts Receivable
P 2,000,000
18
Chapter 3 Receivables
Less Allowance for Uncollectible Accounts
Net amortized cost
3-15
190,000
P1,810,000
(ABC Realty)
Alternative 1
Carrying value (10 M + 1.2 M)
11,200,000
Present value of future cash inflows:
Principal due on 12/31/11
9M x 0.7972
P7,174,800
Interest for 2 years
9M x 8% = 720,000; 720,000 x 1.6901
1,216,872
8,391,672
Impairment loss
P2,808,328
Entry: Restructured Notes Receivable
8,391,672
Impairment Loss Receivables
2,808,328
Notes Receivable
10,000,000
Interest Receivable
1,200,000
Alternative 2
Carrying value (10 M + 1.2 M)
Present value of future cash inflows:
2M + (8% x 10M) = 2,800,000 x 0.89292,500,120
2M + (8% x 8M) = 2,640,000 x 0.79722,104,608
2M + (8% x 6M) = 2,480,000 x 0.71181,765,264
2M + (8% x 4M) = 2,320,000 x 0.63551,474,360
2M + (8% x 2M) = 2,160,000 x 0.56741,225,584
Impairment loss
Entry: Restructured Notes Receivable
Impairment Loss Receivables
Notes Receivable
Interest Receivable
11,200,000
9,069,936
2,130,064
9,069,936
2,130,064
10,000,000
1,200,000
Alternative 3
Carrying value
Present value of future cash inflows:
Principal due on 12/31/09
10M x 0.7972
7,972,000
Interest due on 12/31/10 and 12/31/11
10M x 9% = 900,000; 720,000 x 1.6901
1,521,090
Impairment loss
Entry: Restructured Notes Receivable
Impairment Loss Receivables
Notes Receivable
Alternative 4
Carrying value
Present value of future cash inflows:
Principal due on 12/31/11
11.2M x 0.797193876
Interest due on 12/31/10 and 12/31/11
11.2M x 12% = 1,344,000;
1,344,000 x 1.6900510
Impairment loss
19
10,000,000
9,493,090
506,910
9,493,090
506,910
10,000,000
11,200,000
8,928,572
2,271,428
11,200,000
---------
Chapter 3 Receivables
3-16
(Edsamail Company)
(a)
(b)
Interest Receivable
Interest Revenue
500,000 x 8% x 7/12
Cash
Loss on Sale of Notes Receivable
Notes Receivable
Interest Receivable
3-17
3-18
a.
23,333
23,333
517,500
5,833
500,000
23,333
= P89,260
b.
= P77,774
= P76,176
c.
= P63,156
= P61,988
(Crosswind Corporation)
2009
Feb. 1
Notes Receivable
Accounts Receivable
April 1
Nov.
30
3-19
60,000
60,000
Interest Receivable
Interest Revenue
60,000 x 16% x 2/12
1,600
Cash
Interest Expense
Liability on Discounted Notes
Interest Receivable
60,000 + (60,000 x .16 x 9/12) = 67,200
67,200 (67,200 x .15 x 7/12) = 61,320
CV of Discounted Notes
61,600
Proceeds
61,320
Interest Expense
280
61,320
280
60,000
Accounts Receivable
Notes Receivable
Cash
67,200 + 1,500 = 68,700
68,700
1,600
60,000
1,600
60,000
68,700
(Lexus Company)
Amount of the loan
P625,000
20
Chapter 3 Receivables
Less service charge (2% x 750,000)
Net proceeds from the assignment of accounts receivable
P610,000
Sept. 1
Sept 130
15,000
800,000
Cash
Finance Charges
Notes Payable Pacific Bank
610,000
15,000
Cash
300,000
800,000
625,000
Oct. 131
300,000
300,000
6,250
306,250
10,000
400,000
400,000
325,000
3-20
10,000
3,250
328,250
Accounts Receivable
Accounts Receivable Assigned
90,000
90,000
(Explorer Company)
Accounts receivable factored
P2,000,000
Purchase price
85%__
Purchase price of accounts receivable factored
1,700,000
Less amount withheld as protection against returns and allowances
5% x 1,700,000
85,000_
Net cash received from the factored accounts
P1615,000
Cash
Receivable from Factor
Loss on Factoring
Accounts Receivable
1,615,000
85,000
300,000
2,000,000
21
Chapter 3 Receivables
3-21
(Highlander Company)
a.
Sept. 1 Cash
Receivable from Factor
Loss from Factoring
Accounts Receivable
800,000 x 10% =80,000 Loss;
720,000 x 5% = 36,000 withheld
Nov. 1
b.
Dec. 31
3.22
Cash
Finance Charges
Notes Payable-Bank
3% x 600,000 = 18,000
Uncollectible Accounts Expense
Allowance for Uncollectible Accounts
(190,000 + 1,000,000) x 2% = 23,800
13,400
684,000
36,000
80,000
582,000
18,000
10,400
800,000
600,000
10,400
(Accord Company)
July 1
4,000,000
Cash
Finance Charges
Notes Payable Bank
5% x 3,200,000 = 160,000
3,040,000
160,000
21
150,000
31
Cash
Sales Discounts
Accounts Receivable Assigned
2% x 2,500,000 = 50,000
2,450,000
50,000
2,500,000
48,000
Aug 1
15
150,000
2,500,000
50,000
50,000
Cash
Accounts Receivable Assigned
Sept 1
700,000
10,500
Accounts Receivable
Accounts Receivable Assigned
300,000
22
3,200,000
2,548,000
Aug 31
4,000,000
1,000,000
1,000,000
710,500
300,000
Chapter 3 Receivables
4,000,000 150,000 2,500,000 - 50,000 1,000,000 =
300,000
3 23 (Fortune Company)
Oct. 1
1
31
Nov.
30
2,000,000
Cash
Finance Charges
Notes Payable
1,440,000
90,000
Interest Expense
Notes Payable
Accounts Receivable Assigned
985,000
15,000
Notes Payable
515,000
Interest Expense
Cash
Accounts Receivable Assigned
5,150
279,850
2,000,000
1,500,000
1,000,000
800,000
A
A
A
A
C
MC6
MC7
MC8
MC9
MC10
a
c
c
d
a
MC11
MC12
MC13
MC14
MC15
c
a
d
a
c
Problems
MC16
MC17
MC18
MC19
MC20
b
a
MC21
MC22
MC23
MC24
d
d
c
d
MC25
MC26
b
b
23
Chapter 3 Receivables
MC27
MC28
MC29
MC30
a
b
d
MC31
MC32
MC33
c
c
MC34
MC35
24