College of Business Administration

ACTG 109A – APPLIED AUDITING

Audit of Receivables

NAME:_____________________________________________COURSE & YEAR: __________________

1. You were able to obtain the following from your audit of Sinag Corporation’s Accounts Receivable and
Allowance for Doubtful Accounts:
 From the General Ledger, you noted that the Accounts Receivable has a balance of P1,696,000 as of
December 31, 2017. Below is a transcript of the Allowance for Doubtful Accounts:
Debit Credit Balance
January 1 – Balance P40,000
July 31 – Write-off P32,000 8,000
December 31 – Provision P96,000 104,000

 The summary of the subsidiary ledger as of December 31, 2017 was totaled as follows:
Debit balances:
Under one month P720,000
One to six month 736,000
Over six months 304,000
P1,760,000
Credit balances:
Alin P16,000 - OK; additional billing in Jan. 2018
W. Tan 28,000 - Should have been credited to Jessica*
Dex-C 36,000 - Advances on sales contract
P80,000

*Account is one to six months classification

The customers’ ledger is not an 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
expected to require a reserve of 2 percent. Accounts over six months are analyzed as follows:
Definitely bad P96,000
Doubtful (estimated to be 50% collectible) 48,000
Apparently good, but slow (estimated to be 90% collectible) 160,000
Total P304,000

Compute:
1. Adjusted balance of Accounts Receivable as of December 31, 2017 409,000
2. Adjusted balance of the Allowance for Doubtful Accounts as of December 31, 2017 15,340
3. Doubtful Accounts Expense for the year 2017 37,340

2. Your audit disclosed that on December 31, 2017, the accounts receivable control account of Alilem Company
had a balance of P2,865,000. An analysis of the accounts receivable account showed the following:
Accounts known to be worthless P 112,500
Advance payments to creditors on purchase orders 450,000
Advances to affiliated companies 1,125,000
Customers’ accounts reporting credit balances arising from sales return (675,000)
Interest receivable on bonds 450,000
Other trade accounts receivable – unassigned 2,250,000
Subscription receivable due in 30 days 2,475,000
Trade accounts receivable – assigned (Alien company’s equity in 1,125,000
assigned accounts is P450,000)
Trade instalment receivable due in 1-18 months, including unearned 990,000
finance charges of P90,000
Trade receivables from officers due currently 67,500
Trade accounts on which postdated checks are held (no entries were
made on receipts of checks 225,000
P 8,595,000
Compute:
1. Trade accounts receivable as of December 31, 2017 4,567,500
2. Net current trade and other receivables as of December 31, 2017 7,942,500
3. Non-current assets as of December 31, 2017 1,125,000

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3. Cardis Corp. has the following date relating to accounts receivable for the year December 31, 2017:
Accounts receivable, January 1, 2017 P240,000
Allowance for doubtful accounts, January 1, 2017 9,600
Sales during the year, all on account, terms 2/10, 1/15, n/60 1,200,000
Cash received from customers during the year 1,280,000
Accounts written off during the year 8,800

An analysis of cash received from customers during the year revealed that P705,600 was received from
customers availing the 10-day discount period, P396,000 from customers availing the 15-day discount period,
P2,400 represented recovery of accounts written-off, and the balance was received from customers paying
beyond the discount period.
The allowance for doubtful accounts is adjusted so that it represents certain percentage of the outstanding
accounts receivable at year end. The required percentage at December 31, 2017 is 125% of the rate used on
December 31, 2016.

Compute:
1. Accounts receivable at December 31, 2017 135,200
2. Allowance for doubtful accounts at December 31, 2017 6,760
3. Doubtful accounts expense for the year ended December 31, 2017 3,560

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