A member of the

Unified La Consolacion College

La Consolacion College Tanauan – South Luzon

SEATWORK IN AUDIT OF RECEIVABLES

Name: Date:

Program/Major/Yr.: Score:

DIRECTION: Read and solve the following items. Write your answer on the space provided
before each number.

PROBLEM 1. Sunflower Company sells a variety of imported goods. By selling on credit, Sunflower
cannot expect to collect 100% of its accounts receivable. At December 31, 2015, Sunflower reported
the following on its statement of financial position:

Accounts receivable P2,197,500

Less: Allowance for bad debts (133,500)
Accounts receivable, net P2,064,000

During the year ended December 31,2016, Sunflower earned sales revenue of P537,702,500 and
collected cash of P528,070,500 from customers. Assume bad debt expense for the year was 1% of
sales revenue and that Sunflower wrote off uncollectible accounts totaling P5,439,500.

___________ What is the accounts receivable balance at December 31,2016?

___________ What is the December 31,2016 balance for Allowance for Doubtful Accounts?

PROBLEM 2.The following amounts are shown on the 2016 and 2015 financial Statements of San
Francisco Co.:

2016 2015
Accounts receivable ? P 470,000
Allowance for bad debts 20,000 10,000
Net sales 2,600,000 2,400,000
Cost of goods sold 1,900,000 1,752,000

San Francisco Co.’s accounts receivable turnover for 2016 is 6.5 times.

___________What is the accounts receivable balance as of December 31,2016?

PROBLEM 3.In your audit of LidliddaPlastic Products Co., you noted that the company’s statement
of financial position shows the accounts receivable at December 31,2015 as follows:

Accounts receivable P3,600,000

Allowance for doubtful 72,000
accounts
P3,528,000

During 2016, transactions relating to the accounts were as follows:

a. Sales on account, P38,4000,000
b. Cash received from collection of current receivable totaled P31,360,000, after discount of
P640,000 were allowed for prompt payment.
c. Customers’ accounts of P160,000 were ascertained to be worthless and and were written off.
d. Bad accounts previously written off prior to 2016 amounting to P40,000 were recovered.

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La Consolacion College Tanauan – South Luzon

e. The company decided to provide P184,000 for doubtful accounts by journal entry at the end of the
year.
f. Accounts receivable of P5,600,000 have been pledged to a local bank on loan of P3,200,000.
Collections of P1,200,000 were made on these receivables (not included in the collections previously
given) and applied as partial payment to the loan.

___________The accounts receivable as of December 31,2016 is

___________ The allowance for doubtful accounts as of December 31,2016 is
___________ The net realizable value of accounts receivable balance as of December 31,2016 is

PROBLEM 4.Calachuchi Corp’s account receivable subsidiary ledger shows the following
information:

ACCOUNT BALANCE INVOICE

Customer Dec 31, 2016 Date Amount
Aruy, Inc. P35,180 12/06/16 P14,000
11/29/16 21,180
Naku,Co. 20,920 09/27/16 12,000
08/20/16 8,920
Syak Corp. 30,600 12/08/16 20,000
10/25/16 10,600
Trip Co. 45,140 11/17/16 23,140
10/09/16 22,000
Uy Co. 31,600 12/12/16 19,200
12/02/16 12,400
Xak Corp. 17,400 09/12/16 17,400

The estimated bad debt rates below are based on Calachuchi Corp’s receivable collection
experience.

Age of Accounts Rate

0 – 30 days 1%
31 – 60 days 1.5%
61 – 90 days 3%
91 – 120 days 10%
Over 120 days 50%

The allowance for bad debts account had a debit balance of P5,500 on December 31,2016, before
adjustment.

____________ The company’s accounts receivable under “61-90 days” category should be
____________ The company’s accounts receivable under “91-120 days” category should be
____________ The allowance for bad debts to be reported on the statement of financial position at
December 31,2016, is

PROBLEM 5.The following selected transactions during the year ended December 31,2016:

Gross sales (cash and credit) P750,000

Collections from credit customers, net of 2% cash 245,000
discount
Cash sales 150,000
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La Consolacion College Tanauan – South Luzon

Uncollectible accounts written off 16,000

Credit memos issued to credit customers for sales 8,400
returns and allowances
Cash refunds given to cash customers for sales returns 12,640
and allowances
Recoveries on accounts receivables written off in prior 5,421
years (not included in cash received stated above)

At year-end, the company provides for estimated bad debt losses by crediting the Allowance for Bad
Debts account for 2% of its net credit sales for the year.

_____________ What is the company’s net credit sales in 2016?

_____________ The bad debt expense for 2016 is

PROBLEM 6.Coconut Co. estimates its bad debt expense to be 3% of net sales. The company’s
unadjusted trial balance at December 31,2016, included the following accounts:

Debit Credit
Allowance for bad debts P 8,000
Sales 2,600,000
Sales returns and allowances P45,000

______________What is the Company’s bad debts expense for 2016?

PROBLEM 7.The notes receivable account of Caimito, Inc. consisted of the following:

1. 60-day note of P10,000 dated May 15 with a 9% interest rate, discounted at the bank on June 8 at
12%.

2. 120-day note of 100,000 (face amount) dated October 1 with no stated interest rate and a market
rate of 9% interest, discounted at the bank on November 30 at 12%. The note was received from the
sale of equipment.

______________ The proceeds from discounting of the 60-day note amount to

______________ How much was received by the company from the discounting of the 120-day
note?

PROBLEM 8.Your audit disclosed that on DECEMBER 31,2016, the accountsreceivable control
account of Alilem Company had a balance of P2,865,000. An analysis of the accounts receivable
balance account showed the following:

Accounts known to be worthless P37,500

Advance payments to creditors on purchase orders 150,000
Advances to affiliated companies 375,000
Customers’ accounts reporting credit balances arising (225,000)
from sales returns
Interest receivables on binds 150,000
Other trade receivables – unassigned 750,000
Subscription receivables due in 30 days 825,000
Trade accounts receivable – assigned (Alilem 375,000
Company’s equity accounts is P150,000)

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La Consolacion College Tanauan – South Luzon

Trade installment receivable due 1-18 months, including 330,000

unearned finance charges of P30,000
Trade receivables from officers due currently 22,500
Trade accounts on which post dated checks are held (no 75,000
entries were made on receipts of checks)

____________ The trade receivable as of December 31,2016 is

____________ The net current trade and other receivables as of December 31,2016
____________ How much of the foregoing will be presented under noncurrent assets as of
December 31,2016?

PROBLEM 9.An analysis and aging of Burgos Corp. accounts receivable at December 31,2016,
disclosed the following:

Amounts estimated to be uncollectible P 1,800,000

Accounts receivable 17,500,000
Allowance for doubtful accounts (per books) 1,250,000

___________ What is the net realizable value of Burgos’ receivables at December 31,2016?

PROBLEM 10.The following accounts were taken from Cervantes Inc.’s statement of financial
position at December 31,2016

Debit Credit
Accounts receivable P4,100,000
Allowance for doubtful accounts 100,000
Net credit sales P7,500,000

____________If the doubtful accounts are 3% of accounts receivable, determine the bad debts
expense to be reported

PROBLEM 11. You were able to obtain the following information from your audit of Magsingal
Corporations’s accounts receivable and allowance for doubtful accounts:

From the general ledger you noted that the accounts receivable has a balance of P848,000 as of
December 31,2016. Below is a transcript of the allowance for doubtful accounts:

Debit Credit Balance

January 1 – Balance P20,000
July 31 – Writeoff P16,000 4,000
December 31 – Provision P48,000 P52,000

The summary of the subsidiary ledger as of December 31,2016 was totaled as follows:

Debit balance
Under one month P360,000
One to six months 368,000
Over six months 152,000
P880,000
Credit balance
Alien P8,000 OK ; Additional billing in Jan 2017

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 A member of the
Unified La Consolacion College
La Consolacion College Tanauan – South Luzon

T. Twister 14,000 Should have been credited to Apol *

Dee Lah 18,000 Advances on sales contract
P40,000

*Accounts is one to six months classification

The customer’s ledger is not in agreement with the accounts receivable control. The client requested
you to adjust the control account to the subsidiary ledger after corrections are made.

It is agreed that 1 percent is adequate for accounts under one month. Accounts one to six months
are analyzed as follows:

Definitely bad P48,000

24,000
Doubtful (estimated to be 50% collectible)
Apparently good, but slow (estimated to be 90% 80,000
collectible)
Total P152,000

____________How much is the adjusted balance of accounts receivable as of December 31,2016?

____________How much is the adjusted balance of the allowance for doubtful accounts
____________How much is the doubtful accounts expense

PROBLEM 12.On January 1,2015, Batac Company loaned BadocCompany amounting to

P2,000,000 and received a two-year, 6%, P2,000,000 note. The note calls for annual interest to be
paid each December 31. Batac collected the 2015 interest on schedule. However, on December 31,
2016, 2016 based on Badoc’s recent financial difficulties, Batac expects that the 2016 interest, which
was recorded in the books, will not be collected and that only P1,200,000 of the principal will be in
two equal installments on December 31,2018 and December 31,2019. The prevailing interest rate
for similar type of note as of December 31,2016 is 8%.

____________The present value of the expected future cash flows as of December 31,2016
____________The loam impairment loss
____________ Interest income for the year 2017
____________Carrying amount of the loan as of December 31,2018

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