CHAPTER 18

ACCOUNTS RECEIVABLE
Problem 18-1 (AICPA
Adapted)
Roxy Company provided the following
information relating to accounts
receivable forthe current year:
Accounts receivable on
January 1 1,300,000
Credit sales
5,400,000
Collections from customers, excluding recoveryy 4,750,000
Accounts written off
125,000
Collection of accounts written off inprior year
(customer credit was not reestablished) 25,000
Estimated uncollectible receivables per aging
of receivables 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 18-1 Answer a

Accounts receivable -

January 1 1,300,000
Add: Credit sales 5,400,000
6,700,000
Total
customers 4,750,000
Less: Collection from
Accounts written off 125,000 4,875,000

Accounts receivable
December 31 1,825,000

The recovery of accounts

written off does not affect the balance of
accounts receivable because the effect is offsetting.

217
Problem 18-2 (AICPA Adapted)
J data relating to accounts
4y Company provided the following
receivable for the current year
650,000
Accounts receivable, January I
Credit sales
2,700,000
75,000
Sales returns 40,000
Accounts written off
2,150,000
Collections from customers
Estimated future sales returns at December 3 50,000
Estimated uncollectible accounts at 12/31 per aging
110,000
What is the amortized cost ofaccounts receivable on December 31?
a. 1,200,000
b. 1,125,000
C. 1,085,000
925,000

Solution 18-2 Answer d

Accounts receivable - January1 650,000
Credit sales 2,700,000
Total 3,350,000
Less: Collections from customers 2,150,000
Accounts written off 40,000
Sales returns 75,000 2,265,000
Accounts receivable - December 31
1,085,000

Accounts receivable 1,085,000

Less: Allowance for doubtful accounts 110,000
Allowance for sales returns 50,000 160,000
Net realizable value 925,000
The amortized cost of accounts receivable is the same as the net
realizable value.

218
 Problem 18-3 (AICPA Adapted)
ccounts
AL year-end, Miami Company
reported that the current receivables
consistedofthe following:
650,000
700,000 Tradeaccounts receivable 930,000
75,000 Allowance for uncollectible accounts
40,000 Clain against shipper for goods lost 20,000)
50,000 in transit in November
30,000
50,000 Selling price of unsold goods sent by
10,000 Miami onconsignment at 130% of cost and
r 31? not included in Miami's ending inventory 260,000
Security deposit on lease of warehouse
used for storing some inventories
300,000
Total
1,500,000
What total amount should be reported as trade and other receivables
under current assets at year-end?

940,000
0,000 b. 1,200,000
0,000 C. 1,240,000
0,000 d. 1,500,000

Solution 18-3 Answer a

5,000
Trade accounts receivable 930,000
5,000 Allowance for uncollectible accounts 20,000)
Claim receivable 30,000
,000
Total trade and other receivables 940,000
,000 The selling price ofgoods on consignment is excluded ktom accounts
000
receivable because the goods are still unsold.
net
The cost of the consigned goods of P200,000(260.000/ 130%)
should be included in inventory.

noncurrent receivable.
The security deposit is a

219
 Problem 18-4 (IAA)
current year:
data for the
O m p a n y provided the following
Sales on account 3,600,000
400,000
Notes received to settle accounts
90,000
Provision for doubtful accounts
25,000
ACcounts receivable written off
Purchases on account 3,900,000
Payments to creditors 3,200,000
Discounts allowed by creditors 260,000
Merchandise returned by custormer 15,000
Collections received to settle accounts 2,450,000
250,000
Notes given to creditors in settlement of accounts 70,000
\Merchandise returned to supplierss
Payments on notes payable 100,000
Discounts taken by customers 40,000
Collections received in settlement of notes 180,000

What is the net realizable value of accounts receivable at year-end?

A
d. 605,000
b. 890,000
c. 825.000
d. 670,000

Solution 18-4 Answer a

Sales on account 3,600,0000

Notes received to settle accounts 400,000)
Accounts receivable written off 25,000)
Merchandise returned by customer 15,000)
Collections received to settle accounts
Discounts taken by customers
(2.450,000)
40,000)
Accounts receivable
670,000
Allowance for doubtful accounts
65,000) A
Net realizable value Tr
605,000
Provision for doubtful accounts Ne
Accounts written off
90,000
(25,000) AC
doubtful
Allowance' for accounts
65,000

220
 Problem 18-5 (AICPA Adapted)
When examining theaccounts of
ear Bruteand
balances relating to both receivables Company, it isare
navables ascertainea
included tnat
in a
3,600,000 single controling account called
400,000 of P4,850,000. An analysis ofreceivables control" withadco d
the make-un of this account revealed
90,000 the following:
25,000
900,000 Debit Credit
200,000 Accounts receivable -

customers 7,800,0004
260,000 Trade accounts receivable officers
-

500,000
15,000 Debit balances creditors
300,000
450,000 Postdated checks from customers
400,000
250,000
Subscriptions receivable 800,000
Accounts payable for merchandise
70,000 4,500,000
Credit balances in customers' accounts 200,000
00,000 Cash received in advance from customers
40,000 Expected bad debts 100,000
150,000
80,000
After further analysis of the aged accounts
receivable, it is determined
that the allowance fordoubtful accounts should be
end? P200,000.
1. What is the net realizable value of
accounts receivable?
a. 8,000,000
b 8,500,000
C. 8,300,000
d. 8,550,000
2 What is the balance of accounts payable?
a. 4,200,000
,000 b. 4,700,000
,000) 4,500,000
,000) d. 4,800,000
000)
,000) Solution 18-5 Question 1 Answer b Question 2 Answer c
000)
Accounts receivable - customers
000 (7,800,000 +400,000 postdated checks)
000) 8,200,000
Allowance for doubtful accounts
200,000)
000 Trade accounts receivable-officers 500,000
000 Net realizable value 8,500,000
000)
000 Accounts payable 4,500,000

221
Problem 18-6 (AICPA Adapted)
to current
information relating
Faith Ompany
O Companyprovided the following
operations: 4,000,000
Accounts receivable, January I 8,400,000
Accounts receivable collected 2,000,000
Cash sales 4,800,000
Inventory, January 4,400,000
Inventory, December 31 8,000,000
Purchases 4,200,000
Gross margin on sales

31?
What is the balance ofaccounts receivable on December
a. 8,200,000
b. 6,200,000
C. 2,000,000
d. 4,200,000

Solution 18-6 Answer b

Inventory - January f 4,800,000
Purchases 8,000,000
Goods available for sale 12,800,000
Inventory December 31
-

(4,400,000)
Cost of goods sold 8,400,000
Gross margin on sales 4,200,000
Gross sales 12,600,000
Cash sales
(2,000,000)
Credit sales
Accounts receivable - January
10,600,000
4,000,000
Total
14,600,000
Accounts receivable collected
Accounts receivable - December 31
(8,400,000)
6,200,000

222
 Problem 18-7 (PHILCPA Adapted)
Honduras Company revealed a balance of p8,200,000 in th accounts
receivable control account at year-end.
An analysis of the accounts receivable showed the following:
Accounts known to be worthless 100,000
Advance payments to creditors on purchase orders 400,000
Advances to affiliated entities 1,000,000o
Customers accounts reporting credit balances arising
from sales returns 600,000)
Interest receivable on bonds 400,000
Trade accounts receivable -

unassigned 2,000,000
Subscription receivable dué in 30 days 2,200,000
Trade accOunts receivable -

assigned (Finance
Company's equity in assigned accounts is P500,000) 1,500,000
Trade installments receivable due 1 - 18 months,
including unearned finance charge of P50,000 850,000
Trade-accounts receivable from officers, due currently 150,000
Trade accounts on which postdated checks are held
and no entries were made on receipt of checks 200,000
Total 8,200,000
What amount should be reported as trade accounts receivable at
year-end?
a. 4,650,000
b. 4,700,000
C. 4,150,000
d. 4,050,000

Solution 18-7 Answer a

Accounts receivable - unassigned 2,000,000
Accounts receivable - assigned I.500,000
(850,000- 50,000) 800,000
Trade installments receivable
from officers
rade accounts receivable 150,000
Accounts on which postdated checks are held 200,000
Total trade accounts receivable 4,650,000

223
 r in relation
yeari
curent
the
for
Problem 18-8 (IAA) following
data

the
provided
Von Company f
to accounts receivable:

balance
530,000
credit
Debits 5,250,000
deducting

balance
after
50,000
January 1
of P30,000 1,000,000
Charge sales consignment 10,000
out on
Charge
for goods 25,000
Shareholders' subscriptions
balance balance

5,000
off but recoveredI credit
eredit
written
Accounts an
for January
uary1credit balance balance
500,000
Cash paid to
customer
I credit
to
January
cover
400,000
Goods shipped 300,000
contract
on long-term
Deposit common
carrier
Claim against
Advances to supplier

Credits overpayment
5,200,000
customers,
including
Collections from 35,000
ofPs0,000 25,000
Writeoff 15,000
Merchandise returns damages
customers for shipping 50,000
Allowances to
200,000
Collection on carrier claim
Collection on subscription December 31?
receivable on
. What is the
balance of accounts
a. 565,000
595,000
C. 545,000
d. 495,000
and other receivables should be reported
2. What total amount oftrade
under current assets?

a. 1,745,000
b. 2,045,000
1,245,000

d. 1,195,000

3 What total amount of other receivables should be reported under

noncurrent assets?

a. 1,650,000
b. 1,150,000
1,300,000
d. 1,600,000

224
Solution 18-8

Ouestion1 Answer b
Accounts receivable January 1
-

560,000
Charge sales (530.000 +30,000)
5,250,000
Accounts written off but recovered 10,000
Total
5,820,000
Collections from customers
Writeoff (5,200,000-50,000) (5,150,000)
35,000)
Merchandise returns
25,000)
Allowance to customers for shipping
damages 15,000)
Accounts receivable -

December 31 595,000
Question 2 Answer c

Accounts receivable
Claim receivable (400,000-50,000)
595,000
350,000-
Advances to supplier
300,000
Total trade and other receivables
1,245,000
Ouestion 3 Answer c

Subscriptions receivable (1,000,000-200,000)) 800,000

Deposit on contract 500,000
Total long-term other receivables 1,300,000

225
 Problem 18-9 (LAA)
Wonder Company pro
ompany provided
the following
transactions
ffecting
affectine
accounts receivable during the current yea
Sales 5,900,000o
cash and credit
all of whom
dsh received from credit customers,
Took advantage of the discount
feature of the

credit terms 4/10,n/30

3,024,000
Cash received from cash customers
2,100,000
worthless 50,000
ACCOunts receivable written off as
Credit memorandum issued to credit customers
for sales returns and allowances 250,000
cash refunds given to cash customers for sales

returns and allowances 20,000

Recoveries on áccounts receivable written off as
uncollectible in prior periods not included in

cash received from customers stated above 80,000

Balances on January 1
Accounts receivable 950,000
Allowance for doubtful accounts 100,000
The entity provided for uncollectible account losses by crediting
allowance for doubtful accourits in the amount of P70,000 for the
current year.
1. What is the balance of accounts receivable on December 31?

-a 1,300,000
b. 1,426,000
c. 1,280,000
d. 1,220,000
2 What is the balance of allowance for doubtful accounts on
December 31?
a. 120,000
b. 200,000
C. 250,000
d. 170,000

226
 Solution 18-9

affecting Question 1 Answer a

Accounts receivable - January 1 950,000
Credit sales 3,800,0000
00,000
Total 4,750,000
Cash received from credit customers (3,024,000)
Sales discounts 126,000)
24,000 Accounts receivable written off 50,000)
00,000 Sales returns and allowances 250,000)
50,000
Accounts receivable - December 31 1,300,000

50,000 Total sales 5,900,000

Cash received from cash customers - cash sales (2,100,000)
20,000
Credit sales 3,800,000

Gross accounts receivable collected

0,000 3,150,000
(3,024,000/96%)
Sales discounts (4% x 3,150,000) (126,000)
Cash received from credit customers 3,024,000
0,000
100%
D,000 Gross amount
Cash discount (4/10 or 4% within 10 days) 4%
diting Net amount 96%%
or the
Question 2 Answer b
r31? January 1 100,000
Allowance for doubtful accounts -

written off 80,000

Recovery of accounts
Doubtful accounts expense for
current year 70,000
250,000
Total 50,000)
Accounts written off

Allowance for doubtful

accounts -
December 31 200,000
t son

227
 roblem 18-10 (PHILCPA Adapted)
of
Gen business at the beginning current year.
a n y Company
T
started accounts estimated at
for doubtful
y established an allowance
So
5%0 the entity
wrote off P50,000 of
Credit sales. During the year,
uncollectible accounts.
amounted to
that merchandise purchased
rurtheranalysis showed
was Pl1,500,000. Goods
0 0 0 , 0 0 0 and ending merchandise inventory
were sold at 40% above cost.
and 20% cash sales.
he total sales comprised 80% sales on account
Total collections from customers, excluding cash sales,amounted to
P6,000,000.
1. What is the cost of goods sold?

-7,500,000
b. 5,400,000
c. 3,600,000
d. 6,900,000

22. What is the amount of sales on account?

a. 10,500,000
b. 18,750,000
C. 12,000,000
d 8,400,000

3 What is the net realizable value of accounts receivable at

year-end?

a.1,980,000
b. 2,350,000
C. 1,930,000
d. 2,400,000

228
Solution I8-10
Ouestion1 Answera
Goods available for sale 9,000,000
Ending inventory (1,500,000)
Cost of goods sold
7,500,000
Question 2 Answer d

Cost of goods sold 7,500,000

Markup on cost (40% x
7,500,000) 3,000,000
Total sales 10,500,000
Cash sales (20% x
10,500,000) 2,100,000)
Sales on account 8,400,000

Question 3 Answer a

Sales on account 8,400,000

Collections (6,000,000)
Accounts written off 50,000)
Accounts receivable - December 31 2,350,000

Provision for doubtful accounts (8,400,000 x 5%) 420,000

Accounts written off 50,000)
Allowance for doubtful accounts-- December 31 370,000

Accounts receivable 2,350,000

Allowance for doubtful accounts (370,000)
Net realizable value 1,980,000

229