Module2 Receivables

Republic of the Philippines
BATANGAS STATE UNIVERSITY

Batangas City
email: dency.topacio@g.batstate-u.edu.ph
ACC205- INTERMEDIATE ACCOUNTING 1
Read Chapters 4-9 (Receivables) of your book (Intermediate Accounting Volume 1, 2022 Edition and answer the assigned items.
Assignment
Topic Submit photos of your answers via Google Classroom before the period assigned for checking
Chapter Chapter Title Items
4 Accounts Receivable Problem 1-4, Problem 4A
5 Estimation of Doubtful Accounts Problem 5-7
6 Notes Receivable Problem 8-10
Receivables 7 Loan Receivable Problem 11-13
Receivable Financing
8 Problem 14-16
(Pledge, Assignment and Factoring)
Receivable Financing
9 Problem 17-19
(Discounting of Note Receivable)
Video Lecture References:

Chapter Chapter Title Video Discussion Link
4A Introduction to Receivables https://youtu.be/GMUdMJxUJ0k
4B Accounts Receivable https://youtu.be/w6dgMHsJr9M
5 Estimation of Doubtful Accounts https://youtu.be/kjsqIdLaF7Q
6A Present Value and Amortization https://youtu.be/qU2b45HwSAU
6B Notes Receivable https://youtu.be/sBqGKX991WE
7 Loan Receivable https://youtu.be/aOf6jqHWl3k
8 Receivable Financing (Pledge, Assignment and Factoring) https://youtu.be/fLXp6uoqMc4
9 Receivable Financing (Discounting of Note Receivable) https://youtu.be/Za1b_BkHLZI
Prepared by:
Dency Teñoso Topacio, CPA

Subject Instructor
Batangas City
Problem 1
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 5,350,000
Charge Sales 6,000,000 Write off 35,000
Shareholders’ subscriptions 200,000 Merchandise returns 50,000
Deposit on contract 120,000 Allowances to customer for shipping damages 25,000
Claim against common carrier for damages 200,000 Collections on carrier claims 40,000
IOUs from employees 10,000 Collection on subscriptions 50,000
Cash advance to affiliates 100,000
Advances to supplier 50,000
Required:
1. Compute the correct amount of accounts receivable
2. Prepare one compound entry to adjust the accounts receivable
3. Compute the amount to be presented as “trade and other receivables” under current assets.
4. Indicate the classification and presentation of the other items
Batangas City

Problem 2
Affectionate Company sold merchandise on account for P500,000. The terms of are 2/10, n/30. The related freight charge
amounted to P20,000. The account was collected within the discount period.
Prepare the journal entries to record the transactions under the following freight terms:
1. FOB Destination and freight collect
2. FOB Destination and freight prepaid
3. FOB Shipping point and freight collect
4. FOB Shipping point and freight prepaid
Batangas City

Problem 3
At year-end, Harem Company reported accounts receivable of P8,200,000 with the following analysis:
Accounts known to be worthless 100,000
Advance payments on purchase orders 400,000
Advances to subsidiary 1,000,000
Customers’ accounts reporting credit balances
arising from sales returns (600,000)
Trade accounts receivable 3,500,000
Subscription receivable due in 30 days 3,200,000
Trade installments receivable due 1-18 months, including
unearned finance charge of P30,000 850,000
Trade accounts receivables from officers, due currently 150,000
Trade accounts on which postdate checks are held and
no entries were made on receipt of checks 200,000
What is the correct balance of trade accounts receivable?
Batangas City

Problem 4
Von Company provided the following data for the current year in relation to accounts receivable
Debits
January 1 balance after deducting credit balance P30,000 630,000
Charge sales 5,250,000
Charge for goods out on consignment 50,000
Shareholder’s subscriptions 1,000,000
Accounts written off but recovered 10,000
Cash paid to customer for January 1 credit balance 25,000
Goods shipped to cover January 1 credit balance 5,000
Deposit on long term contract 500,000
Claim against common carries 400,000
Advances to supplier 300,000
Credits
Collections from customers, including overpayment of P50,000 5,200,000
Write off 35,000
Merchandise returns 25,000
Allowances to customers for shipping damages 15,000
Collection on carrier claim 50,000
Collection on subscription 200,000
1. What amount should be reported as accounts receivable on December 31?

2. What total amount of trade and other receivables should be reported under current assets?
3. What total amount of other receivables should be reported under noncurrent assets?
Batangas City

Problem 4A
The financial statements of Determination Company include the following:

December 31, 2021 December 31, 2022
Accounts receivable P900,000
Allowance for doubtful accounts 45,000
Sales P7,500,000
Cash collected from customers 6,540,000
Among the cash collections was the recovery of P15,000 receivable from a customer whose account had been
written off as worthless in 2021. During 2022, it was necessary to write-off uncollectible, customers' accounts
at P75,000. On December 1, 2022, a customer settled his account by issuing a 12% six-month note for
P300,000.
On December 31, 2022, the accounts receivable included P450,000 at past due accounts. After careful study,
the management estimated that the probable loss on past due accounts is 20% and that in addition, 5% of
the current accounts may prove uncollectible.
1. What is the balance of accounts receivable on December 31, 2022?

2. What is the balance of allowance for doubtful accounts before adjustment on December 31, 2022?
3. How much is the required allowance for doubtful accounts on December 31, 2022?
4. How much increase in allowance for doubtful accounts is required on December 31, 2022?
Batangas City

Problem 5
At the beginning of current year, Jocose Company reported the following:

Accounts Receivable 2,000,000
Allowance for doubtful accounts 100,000
Additional information for the current year:
1. Cash sales of the entity amount to P800,000 and represent 10% of gross sales
2. Ninety percent of the credit sales customers do not take advantage of the 5/10, n/30 terms
3. Customers who did not take advantage of the discount paid P5,940,000
4. It is expected that cash discounts of P10,000 will be taken on accounts receivable outstanding at
December 31, 2019
5. Sales returns amounted to P80,000. All returns were from charge sales.
6. During the year, accounts totaling P60,000 were written off as uncollectible. Recoveries during the year
amounted to P10,000. This amount is not included in the collections.
7. The allowance for doubtful accounts is adjusted so that it represents a certain percentage of the
outstanding accounts receivable at year-end.
Required:
1. Prepare the journal entries to record the transactions
2. What is the net realizable value of accounts receivable at year-end.
Batangas City

Problem 6
From inception of operations, Comprehensive Company provided for uncollectible accounts expense under the
allowance method using the percentage of sales method.
No year en adjustments to the allowance account were made.
The balance in the allowance for doubtful accounts was P1,000,000 on January 1, 2022.
During the current year, credit sales totaled P20,000,000, interim provisions for doubtful accounts were made
at 2% of credit sales, bad debts of P200,000 were written off and recoveries of accounts previously written off
amounted to P50,000.
An aging of accounts receivable was made for the first time on December 31, 2022
Aging Balance Uncollectible

0-60 6,000,000 10%
61-180 2,000,000 20%
181-360 1,500,000 30%
Over 360 500,000 50%
Based on the review of collectibility of the account balances in the “over 360 days” aging category, additional
accounts totaling P75,000 are to be written off on December 31, 2022.
Effective with the year ended December 31, 2022, the entity adopted a new accounting method for estimating
the allowance for doubtful accounts at the amount indicated by the year-end aging of accounts receivable.
1. What is the balance of the allowance for doubtful accounts on December 31, 2022 before adjustment?
2. What is the required allowance for doubtful accounts on December 31, 2022?
3. What amount should be reported as doubtful accounts expense for the current year?
4. What is the year end adjustment to the allowance for doubtful accounts on December 31, 2022?
5. What is the net realizable value of accounts receivable on December 31, 2020?
Batangas City

Problem 7
Sky Company provided the following information at year-end:

2022 2021
Accounts receivable 880,000 800,000
Allowance for doubtful accounts (10,000) (15,000)
Allowance for sales returns (10,000) (25,000)
Net realizable value 850,000 760,000
The entity reported doubtful accounts expense in 2022 of P30,000 and had products returned for credits
totaling P15,000 at sale price. Gross sales for 2022 amounted to P6,150,000.
1. What amount of accounts receivable was written off during 2022?
2. What amount was collected from customers during 2022?
3. What amount was recorded as estimated sales returns during 2022?
4. What amount was reported as net sales for 2022?
Batangas City
Problem 8
On January 1, 2022, Enigma Company sold an equipment costing P450,000 which had a carrying amount of
P350,000, receiving a P125,000 down payment and, as additional consideration, a P400,000 noninterest
bearing note due on January 1, 2025.
There was no established exchange proce for the equipment and the note had no ready market.
The prevailing rate of interest for a note of this type at January 1, 2022 was 12%. The present value of 1 at
12% for three periods is 0.7118.
Prepare journal entries for 2022, 2023, 2024 and 2025.

Batangas City
Problem 9
On December 31, 2022, Chang Company sold a machine in the ordinary course of business to Door Company
in exchange for a noninterest bearing note requiring ten annual payments of P850,000.
The entity made the first payment on December 31, 2022. The market interest rate for similar notes at date of
issuance was 8%.
PV of an ordinary annuity of 1 at 8% for 9 periods 6.25

PV of an ordinary annuity of 1 at 8% for 10 periods 6.71
1. What is the amount of sales revenue?

2. On December 31, 2022, what is the carrying amount of the note receivable?
3. What amount should be reported as interest income for 2023?
4. What is the carrying amount of the note receivable on December 31, 2023?
Batangas City

Problem 10
On January 1, 2022, Akin Company sold equipment with a carrying amount of P4,500,000 in exchange for a P6,000,000
noninterest-bearing note due January 1, 2025. There was no established exchange price for the equipment.
The prevailing rate of interest for a similar note was 10%

The present value of 1 at 10% for three periods is 0.75.
1. What amount should be reported as interest income for 2022?

2. What amount should be reported as gain or loss on sale of equipment for 2022?
Batangas City

Problem 11
On January 1, 2022, Empress Bank granted a loan to a borrower. The interest on the loan is 10% payable annually on
December 31, 2022. The loan matures in three years ending December 31, 2024.
Principal amount 5,000,000

Direct origination cost incurred 457,500
Origination fee charged against the borrower 200,000
After considering the origination fee charged against the borrower and the direct origination cost incurred, the effective
rate on the loan is 8%.
1. Determine the carrying amount of the loan on January 1, 2022.

2. Prepare a table of amortization of the direct origination cost.
3. Prepare journal entries for 2022, 2023 and 2024.
Batangas City

Problem 12
Cozy Bank loaned a borrower P7,500,000 on January 1, 2020. The terms of the loan were payment in full on
January 1, 2025, plus annual interest payment at 12%.
The interest payment was made as scheduled on January 1, 2021. However, due to financial setbacks, the
borrower was unable to make the 2022 interest payment.
The bank considered the loan impaired and projected the cash flows from the loan on December 31, 2022.
The bank accrued the interest in December 31, 2021, but did not continue to accrue interest for 2022 due to
the impairment of the loan.
Projected Cash Flow
Date of Cash Flow Amount Projected 12/31/2022

December 31, 2023 500,000
December 31, 2024 1,000,000
December 31, 2025 2,000,000
December 31, 2026 4,000,000
Present value of 1 at 12%

For one period 0.89
For two periods 0.80
For three periods 0.71
For four periods 0.64
1. Compute the present value of the loan receivable on December 31, 2022
2. Compute the impairment loss on the loan receivable
3. Prepare journal entries for 2022, 2023 and 2024
Batangas City

Problem 13
On December 31, 2022, Oregon Bank recorded an investment of P6,000,000 in a loan granted to a client.
The loan has a 10% effective interest rate payable annually every December 31. The principal is due in full at
maturity on December 31, 2025.
Unfortunately, the borrower is experiencing significant financial difficulty and will have difficult time in making
full payment.
The bank projected that the entire principal will be paid at maturity and 4% interest of P200,000 will be paid
on December 31 of the next three years. There is no accrued interest on December 31, 2022.
The present value of 1 at 10% for three periods is 0.75, and the present value of an ordinary annuity of 1 at
10% for three periods is 2.49.
1. What is the impairment loss for 2022?

2. What is the interest income for 2023?
3. What is the carrying amount of the loan receivable on December 31, 2023?
Batangas City
Problem 14
On December 1, 2022, Solvent Company assigned specific accounts receivable totaling P5,000,000 as collateral
on a P4,000,000 12% note from a certain bank. The entity will continue to collect the assigned accounts
receivable.
In addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance on the
assigned accounts.
The December collections of assigned accounts receivable amounted to P2,000,000 less cash discount of
P200,000.
On December 31, 2022, the entity remitted the collections to the bank in payment for the interest accrued on
December 31, 2022 and the note payable.
The entity accepted sales returns of P100,000 on the assigned accounts and wrote off assigned accounts of
P300,000.
1. What amount of cash was received from the assignment of accounts receivable on December 1, 2022?
2. What is the carrying amount of note payable on December 31, 2022?
3. What amount should be disclossed as the equity of Solvent Company in assigned accounts on
December 31, 2022?
Batangas City
Problem 15
Crater Company factored with recourse P2,000,000 of accounts receivable with a bank.
The finance charge is 5% and 12% was retained to cover sales discounts, sales returns and sales allowances.
The transaction met the condition to be considered as sale but subject tor ecourse for nonpayment. The factor
estimated the recourse obligation at P60,000.
What total amount should be recognized initially as loss on factoring?
Batangas City
Problem 16
Zeus Company factored P8,000,000 of accounts receivable to a finance entity at the beginning of current year.
Control was surrendered by Zeus Company.
The factor accepted the accounts receivable subject to recourse for nonpayment. The fair value of the
recourse obligation is P100,000.
The factor assessed a fee of 3% and retained a holdback equal to 5% of the accounts receivable.
In addition, the factor charged 15% interest computed on a weighted average time to maturity of the
accounts receivable of 54 days.
1. What is the amount of cash initially received from the factoring?
2. If all accounts are collected, what is the loss on factoring the accounts receivable?
3. If all accounts are not collected, what is the loss on factoring?
Batangas City
Problem 17
Morale Company provided the following transactions:

March 14 Sale of merchandise, P2,050,000 to a customer, FOB Destination 2/10, n/30
April 7 Receipt of a 60-day, 12% note dated April 5 from the customer. The face of the note was the
amount of the invoice minus freight charge of P50,000 paid by the customer in connection with
the March 14 sale.
April 20 The note of the customer was discounted with the bank at 15%.
June 4 Receipt of notification from bank that the customer dishonored the note. Accoudingly, the entity
paid the bank the amount due including protest fee and other charges of P15,000.
July 4 Receipt of cash from the customer for the full amount of indebtedness plus interest on the
original face value.
Prepare journal entries to record the transactions assuming any discounting of note receivable is accounted for
as a conditional sale with recognition of a contingent liability.
Batangas City

Problem 18
Foremost Company received from a customer a one-year, P500,000 note bearing annual interest of 8%.
After holding the note for eight months, the entity discounted the note at the bank at an effective interest rate of 10%.
1. What amount of cash was received from the bank?
2. What is the loss on note receivable discounting?
Batangas City

Problem 19
On July 1, 2022, Jolly Company sold goods in exchange for P3,000,000, 8-month, noninterest-bearing note receivable.
At the time of the sale, the note’s market rate of interest was 12%. The note was discounted at 10% on December 1,
2022.
1. What amount was received from the note receivable discounting?
2. What is the loss on note receivable discounting?

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Republic of the Philippines

BATANGAS STATE UNIVERSITY

ACC205- INTERMEDIATE ACCOUNTING 1

Video Lecture References:

Dency Teñoso Topacio, CPA

ACC205- INTERMEDIATE ACCOUNTING 1

ACC205- INTERMEDIATE ACCOUNTING 1

ACC205- INTERMEDIATE ACCOUNTING 1

ACC205- INTERMEDIATE ACCOUNTING 1

1. What amount should be reported as accounts receivable on December 31?

ACC205- INTERMEDIATE ACCOUNTING 1

The financial statements of Determination Company include the following:

1. What is the balance of accounts receivable on December 31, 2022?

ACC205- INTERMEDIATE ACCOUNTING 1

At the beginning of current year, Jocose Company reported the following:

ACC205- INTERMEDIATE ACCOUNTING 1

No year en adjustments to the allowance account were made.

Aging Balance Uncollectible

ACC205- INTERMEDIATE ACCOUNTING 1

Sky Company provided the following information at year-end:

ACC205- INTERMEDIATE ACCOUNTING 1

Prepare journal entries for 2022, 2023, 2024 and 2025.

ACC205- INTERMEDIATE ACCOUNTING 1

PV of an ordinary annuity of 1 at 8% for 9 periods 6.25

1. What is the amount of sales revenue?

ACC205- INTERMEDIATE ACCOUNTING 1

The prevailing rate of interest for a similar note was 10%

1. What amount should be reported as interest income for 2022?

ACC205- INTERMEDIATE ACCOUNTING 1

Principal amount 5,000,000

1. Determine the carrying amount of the loan on January 1, 2022.

ACC205- INTERMEDIATE ACCOUNTING 1

Projected Cash Flow

Date of Cash Flow Amount Projected 12/31/2022

Present value of 1 at 12%

ACC205- INTERMEDIATE ACCOUNTING 1

1. What is the impairment loss for 2022?

ACC205- INTERMEDIATE ACCOUNTING 1

ACC205- INTERMEDIATE ACCOUNTING 1

ACC205- INTERMEDIATE ACCOUNTING 1

ACC205- INTERMEDIATE ACCOUNTING 1

Morale Company provided the following transactions:

ACC205- INTERMEDIATE ACCOUNTING 1

ACC205- INTERMEDIATE ACCOUNTING 1

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