1

RECEIVABLES

Problem

1. On December 31, 2023, the accounts receivable control account of Kaila Company had a
balance of 2,865,000. An analysis of the accounts receivable account showed the following:

Accounts known to be worthless P 37,500

Advance payments to creditors on purchase orders 150,000
Advances to affiliated companies 375,000
Customers’ accounts reporting credit balances arising
from sales return (225,000)
Interest receivable on bonds 150,000
Other trade accounts receivable – unassigned 750,000
Subscriptions receivable due in 30 days 825,000
Trade accounts receivable - assigned (Kaila company’s
equity in assigned accounts is P150,000) 375,000
Trade installment receivable due 1 – 18 months,
including unearned finance charges of P30,000 330,000
Trade receivables from officers due currently 22,500
Trade accounts on which post-dated checks are held (no
entries were made on receipts of checks) 75,000
P2,865,000

Based on the above information, determine the adjusted balance of following:

1. The trade accounts receivable as of December 31, 2023 is

a. 1,147,500
b. 1,522,500
c. 1,485,000
d. 1,447,500

2. The net current trade and other receivables as of December 31, 2023 is
a. 2,647,500
b. 2,610,000
c. 2,272,500
d. 1,822,500

3. How much of the foregoing will be presented under noncurrent assets as of December 31,
2023?
a. 1,200,000
b. 375,000
c. 525,000
d. 0

2. Presented below are a series of unrelated situations. Answer the following questions relating to
each of the independent situations as requested.

1. Kaila Company’s unadjusted trial balance at December 31, 2023, included the following
accounts:
Debit Credit
Accounts receivable P1,000,000
Allowance for doubtful accounts 40,000
Sales P15,000,000
Sales returns and allowances 700,000

Kaila Company estimates its bad debt expense to be 1 1/2% of net sales. Determine its bad
debt expense for 2023.
a. 225,000
b. 254,500
c. 214,500
d. 55,000
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2. An analysis and aging of Connie Corp. accounts receivable at December 31, 2023,
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 Connie’ receivables at December 31, 2023?
a. 15,700,000
b. 17,500,000
c. 16,250,000
d. 14,450,000

3. Connie Company provides for doubtful accounts based 3% of credit sales. The following
data are available for 2023.

Credit sales during 2023 P21,000,000

Allowance for doubtful accounts 1/1/2023 170,000
Collection of accounts written off in prior years
(Customer credit was reestablished) 80,000
Customer accounts written off as uncollectible
during 2023 300,000

What is the balance in allowance for doubtful accounts at December 31, 2023?
a. 630,000
b. 420,000
c. 500,000
d. 580,000

4. At the end of its first year of operations, December 31, 2023, Joseph, Inc. reported the
following information:

Accounts receivable, net of allowance for

doubtful accounts P9,500,000
Customer accounts written off as uncollectible
during 2023 240,000
Bad debts expense for 2023 840,000

What should be the balance in accounts receivable at December 31, 2023, before
subtracting the allowance for doubtful accounts?
a. 10,100,000
b. 10,340,000
c. 9,740,000
d. 10,580,000

5. The following accounts were taken from Joseph Inc.’s statement of financial position at
December 31, 2023.

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

If doubtful accounts are 3% of accounts receivable, determine the bad debt expense to be
reported for 2023.
a. 123,000
b. 23,000
c. 223,000
d. 225,000
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3. In your audit of the books of Angel Company for the year of 2023, you concluded that the
allowance for doubtful accounts should be adjusted to equal the estimated amount required
based on aging of the accounts as of December 31. During your audit, you were able to gather
the following data:
Allowance for doubtful accounts, Jan. 2, 2023 P300 000
Provision for doubtful accounts during 2023 150 000
(3% of P5 000 000 sales)
Bab debts written off in 2023 187 500
Recovery of bad debts written off during 2023 50 000
Estimated doubtful accounts per aging on Dec. 31, 2023 200 000
Accounts receivable, Dec. 31, 2023 2,375 000

1. Doubtful accounts expense for 2023

a. 350 000
b. 162 500
c. 37 500
d. 112 500

2. Net realizable value of accounts receivable of December 31, 2023

a. 2 375 000
b. 2 575 000
c. 2 175 000
d. 2 875 000

3. The increase (decrease) in the recorded allowance for doubtful accounts of

December 31, 2023
a. 112 500
b. 512 500
c. 312 500
d. 200 000

4. Tricia Company started business at the beginning of current year. The entity established a
doubtful accounts expense at 5% of credit sales.

During the year, the entity wrote off 50,000 of uncollectible accounts. Further analysis showed
that merchandise purchased amounted to 9,000,000 and ending merchandise inventory was
1,500,000. Goods were sold at 40% above cost.

The total sales comprised 80% sales on account and 20% cash sales. Total collections from
customers, excluding cash sales amounted to 6,000,000.

1. What is the cost of goods?

a. 7,500,000
b. 18,750,000
c. 12,000,000
d. 8,400,000

2. 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
e. 2,030,000
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5. Joseph Company’s statement of financial position shows the accounts receivable balance at
December 31, 2022 as follows:

Accounts receivable P3,600,000

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

During 2023, transactions relating to the accounts were as follows:

 Sales on account, 38,400,000.

 Cash received from collection of current receivables totaled 31,360,000, after discount of
640,000 were allowed for prompt payment.

 Customers’ accounts of 160,000 were ascertained to be worthless and were written off.

 Bad accounts previously written off prior to 2023 amounting to 40,000 were recovered.

 The Company decided to provide 184,000 for doubtful accounts by journal entry at the end
of the year.

 Accounts receivable of 5,600,000 have been pledged to a local bank on a loan of 3,200,000.
Collections of 1,200,000 were made on these receivables (not included in the collections
previously given) and applied as partial payment to the loan.

Based on the above data, answer the following:

1. The accounts receivable as of December 31, 2023 is

a. 8,680,000
b. 9,840,000
c. 4,240,000
d. 8,640,000

2. The allowance for doubtful accounts as of December 31, 2023 is

a. 8,000
b. 136,000
c. 184,000
d. 176,000

3. The net realizable value of accounts receivable as of December 31, 2023 is

a. 8,544,000
b. 8,456,000
c. 8,504,000
d. 4,104,000

4. If receivables are hypothecated against borrowings, the amount of receivables involved

should be
a. Disclosed in the statements or notes
b. Excluded from the total receivables, with disclosure
c. Excluded from the total receivables, with no disclosure
d. Excluded from the total receivables and a gain or loss is recognized between the face
value and the amount of borrowings
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6. On January 1, 2023, JP Co. sells its equipment with a carrying value of 160,000. The company
receives a non-interest-bearing note due in 3 years with a face amount of 200,000. There is no
established market value for the equipment. The prevailing interest rate for a note of this type is
12%. The following are the present value factors of 1 at 12%:

Present value of 1 for 3 periods 0.71178

Present value of an ordinary annuity of 1 for 3 periods 2.40183

1. What is the gain or loss to be recognized on the sale of the equipment?

a. 17,644 loss
b. 122 gain
c. 17,644 gain
d. 40,000 gain

2. The discount on note receivable on January 1, 2023, is

a. 57,644
b. 0
c. 40,000
d. 17,644

3. The discount amortization at the end of the third year using the effective interest method is
a. 13,333
b. 19,215
c. 21,428
d. 0

7. On December 31, 2022, Ozz Company sold used equipment with carrying amount of 3,000,000
in exchange for a non-interest bearing note of 7,000,000 requiring ten annual payments of
700,000. The first payment was made on December 31, 2023.

The market interest for similar note was 12%. The present value of an ordinary annuity of 1 at
12% is 5.65 for ten periods and 5.33 for nine periods.

1. What is the carrying amount of the note receivable on December 31,

2022?
a. 4,034,000
b. 3,955,000
c. 4,350,000
d. 5,330,900

2. What is the gain on sale of equipment to be recognized in 2022?

a. 559,000
b. 955,000
c. 595,000
d. 950,500

3. What amount should be recognized as interest income for 2023?

a. 400,000
b. 474,600
c. 386,400
d. 375,093

4. What is the carrying amount of the note receivable on December 31, 2023?
a. 3,729,600
b. 3,972,000
c. 3,927,000
d. 3,970,200
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8. On December 31, 2021, Ozz Company finished consultation services and accepted in exchange
a promissory note with a face value of 600,000, a due date of December 31, 2024, and a stated
rate of 5%, with interest receivable at the end of each year. The fair value of the services is not
readily determinable and the note is not readily marketable. Under the circumstances, the note
is considered to have an appropriate imputed rate of interest of 10%. The following interest
factors are provided:
Interest Rate
Table Factors For Three Periods 5% 10%
Future Value of 1 1.15763 1.33100
Present Value of 1 .86384 .75132
Future Value of Ordinary Annuity of 1 3.15250 3.31000
Present Value of Ordinary Annuity of 1 2.72325 2.48685

1. What is the present value of the note on December 31, 2021?

a. 450,792
b. 530,000
c. 600,000
d. 525,398

2. What is the amount of discount on notes receivable on December 31, 2021?

a. 75,000
b. 52,062
c. 74,602
d. 81,697

3. What is the amount of discount amortized during December 31, 2023?

a. 0
b. 22,540
c. 24,794
d. 27,268

4. What is the amount of interest income during December 31, 2023?

a. 52,540
b. 54,794
c. 57,268
d. 0

*9. On December 1, 2023, Tris Company assigned 400,000 of accounts receivable to Kaila, in
consideration for a loan of 335,000. Company charged a 2% commission on the amount of the
loan; the interest rate on the note was 10%. During December, Tris collected 110,000 on
assigned accounts after deducting 380 of discounts. Tris accepted returns worth 1,350 and
wrote off assigned accounts of 2,980.

1. How much cash did Tris receive from Kaila at the time of the transfer?
a. 301,500
b. 327,000
c. 328,300
d. 335,000

2. What is the carrying value of the account receivable assigned as of December 31, 2023?
a. None
b. 285,290
c. 289,620
d. 335,000
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*10. On December 1, 2021, Winterton Company assigned specific accounts receivable totaling
P3,100,000 as collateral on a P2,500,000, 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 charge deducted in advance on the P2,500,000 value of the
note. The December collections of assigned accounts receivable amounted to P1,000,000 less
cash discounts of P50,000. On December 31, 2021, the entity remitted the collections to the
bank in payment for the interest accrued on December 31, 2021 and the note payable.

1. What amount of cash was received from the assignment of accounts receivable on December
1, 2021?
a. 2, 000, 000
b. 2, 150, 0000
c. 2, 375, 0000
d. 3, 100, 000

2. What is the carrying amount of note on December 31, 2021?

a. 1, 550, 000
b. 1, 575, 000
c. 1, 600, 000
d. 1, 757, 000

3. What amount should be disclosed as the equity of Winterton Company in assigned accounts
on December 31, 2021?
a. 425, 000
b. 475, 000
c. 495, 000
d. 525, 000

*11. On February 1, 2023, Joseph Corporation factored receivables with a carrying amount of
2,000,000 to Jerome Corporation. Joseph Corporation assesses a finance charge of 3% of the
receivables and retains 5% of the receivables.

1. If the factoring is treated as a sale, what amount of loss from sale should the company report
in its 2023 statement of comprehensive income for the year 2023?
a. none
b. 60,000
c. 100,000
d. 160,000

2. Assume that Joseph Company retained significant amount of risk and rewards of ownership
and had a continuing involvement on the factored financial asset, what amount of loss from
factoring should the company recognize?
a. none
b. 60,000
c. 100,000
d. 160,000

*12. Jerome Received from a customer a one-year, P375,000 note bearing annual interest of 8%.
After holding the note for six months, Jerome discounted the note at I-Bank at an effective
interest rate of 10%.

1. How much should Jerome receive from the bank?

a. 371,428.50
b. 384,750.00
c. 392,857.50
d. 405,000.00

2. If the discounting is treated as a sale, what amount of loss on discounting should

Jerome recognize?
a. 0
b. 5,250
c. 9,750
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d. 20,250

*13. Scotia Bank granted a 10-year loan to Shawn Company in the amount of 1,500,000 with a
stated interest rate of 6%. Payments are due monthly and are computed to be 16,650. Scotia
Bank incurred 40,000 of direct loan origination cost and 20,000 of indirect loan origination cost.
In addition, the bank charged Shawn Company a 4% nonrefundable loan origination fee.

1. Scotia Bank, the lender, has a carrying amount of

a. 1,440,000
b, 1,480,000
c. 1,500,000
d. 1,520,000

2. Shawn Company, the borrower, has carrying amount of

a. 1,440,000
b. 1,480,000
c. 1,500,000
d. 1,520,000

*14. TD Bank granted a loan to a borrower on January 1, 2021. The interest rate on the loan is 10%
payable annually starting December 31, 2021. The loan matures in five years on December 31,
2025. The data related to the said loan are:

 Principal Amount 8,000,000

 Origination fee received from the borrower 1,250,000
 Direct origination cost incurred 50,000

The effective rate on the loan after considering the direct origination cost incurred and the
origination fee is 15%.

1. What is the carrying amount of the loan receivable on January 1, 2021?

a. 3,544,000
b. 4,600,000
c. 5,504,000
d. 6,800,000

2. What is the interest income for 2021?

a. 1,709,000
b. 1,907,000
c. 1,020,000
d. 2,000,000

3. What is the carrying amount of the loan receivable on December 31, 2021?
a. 7,020,000
b. 8,000,000
c. 6,200,000
d. 5,100,000

*15. PNB Bank granted a loan to a borrower in the amount of 5,000,000 on January 1, 2023. The
interest rate on the loan is 10% payable annually starting December 31, 2023. The loan
matures in five years on December 31, 2027. PNB Bank incurs 39,400 of direct loan origination
cost and 10,000 of indirect loan origination cost. In addition, PNB Bank charges the borrower
an 8-point nonrefundable loan origination fee.

Based on the above information, answer the following: (Round off present value factors to four
decimal places)

1. The carrying amount of the loan as of January 1, 2023 is

a. 5,000,000
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b. 4,639,400
c. 5,039,400
d. 4,649,400

2. The effective interest rate of the loan is

a. 10.00%
b. 11.94%
c. 12.00%
d. 9.80%

3. The interest income to be recognized in 2023 is

a. 500,000
b. 555,138
c. 493,861
d. 556,728

4. The carrying amount of the loan as of December 31, 2023 is

a. 5,000,000
b. 4,696,128
c. 5,033,261
d. 4,704,538

16. On January 1, 2022, Omar Company loaned Alex Company amounting to 2,000,000 and
received a two-year, 6%, 2,000,000 note. The note calls for annual interest to be paid each
December 31. Omar collected the 2022 interest on schedule. However, on December 31,
2023, based on the Alex’s recent financial difficulties, Omar expects that the 2023 interest,
which was recorded in the books, will not be collected and that only 1,200,000 of the principal
will be recovered. The 1,200,000 principal amount is expected to be collected in two equal
installments on December 31, 2025 and December 31, 2027. The prevailing interest rate for
similar type of note as of December 31, 2023 is 8%.

Based on the above information, answer the following: (Round off present value factors to four
decimal places)

1. The present value of the expected future cash flows as of December 31, 2023 is
a. 955,380
b. 2,079,060
c. 1,009,260
d. 950,920

2. The loan impairment loss in 2023 is

a. 1,164,620
b. 990,740
c. 1,110,740
d. 40,940

3. How much is the interest income for the year 2024?

a. 60,556
b. 124,744
c. 57,323
d. 0

4. Carrying amount of the loan as of December 31, 2025 is

a. 473,465
b. 534,005
c. 1,736,032
d. 1,134,005
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17. At December 31, 2022, Josh Co. had a receivable from A Company of 400,000 that has been
outstanding for quite some time. Further investigation revealed that F Company is taking over to
run and operate the business affairs of A Company. However F Company is more than willing
to assume only 75% of A Company’s obligation and pay by the end of 2023. At the time the
receivable was recognized the prevailing rate of interest for similar financial asset is 14%.

1. What amount should Josh report its receivable on December 31, 2022 statement of financial
position?
a. 136,843
b. 263,157
c. 300,000
d. 400,000

2. How much impairment loss should be recognize related to its accounts receivable in
2022?
a. 136,843
b. 263,157
c. 300,000
d. 400,000

18. On December 31, 2023, general ledger of Steven Company’s account receivable showed a
balance of 1,400,000. Because of continuing decrease in expected cash flows on its financial
assets. Steven Company has decided to estimate the cash flow of the outstanding receivables.
The estimates are based on the expected peso amount to be received on the outstanding
receivables: the category (age) which also includes the length and period of collectibility and
time factor for similar borrowers.

Category Amount Time Factor

A 400,000 .909
B 300,000 .826
C 250,000 .751
D 150,000 .683

1. How much should Steven Company report its account receivable in its December 31, 2023
statement of financial position?
a. 799,150
b. 901,600
c. 1,200,000
d. 1,400,000

2. What amount of loss impairment on receivable should Steven Company recognize in its
December 31, 2023 statement of comprehensive income?
a. 200,000
b. 300,000
c. 300,850
d. 498,400

19. Connie Inc. Assigns 2,000,000 of its accounts receivables as collateral for a 1 million 8% loan
with a bank. Connie Inc. also pays a finance fee of 1% on the transaction upfront. What would
be recorded as a gain (loss) on the transfer of receivables?
a.Loss of 20,000.
b.Loss of 160,000.
c.Loss of 180,000.
d. 0.

20. Alex Company sold accounts receivable without recourse with face amount of 5,000,000. The
factor charged 14% commission on all accounts receivable factored and withheld 12% of the
accounts factored as protection against customer returns and other adjustments. The entity has
previously established an allowance for doubtful accounts of 150,000 for these accounts. By
year-end, the entity had collected the factor's holdback there being no customer returns and
other adjustments.
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1. What amount of cash was initially received from the factoring?

a. 4,400,000
b. 4,300.000
c.3,700,000
d. 6,300,000

2. What is the loss on factoring?

a. 350,000
b. 450,000
c. 550,000
d. 650,000

21. Joseph Company provided some information on their financial records on December 31,2023:

Accounts receivable, January 1 1,920,000

Collections of account receivable 6,240,000
Bad debts 200,000
Inventory, January 1 2,880,000
Inventory, December 31 2,640,000
Accounts payable, January 1 1,000,000
Accounts payable, December 31 1,500,000
Cash sales 1,200,000
Purchases 4,800,000
Gross Profit on Sales 2,160,000

What is the ending balance of accounts receivable on December 31, 2023?

a. 1,680,000
b. 2,880,000
c. 3,120,000
d. 4,080,000

22. On December 28, 2023, Omar Company sells a loan portfolio that has a carrying amount of
300,000 for 290,000 and provides the buyer with guarantee to compensate for any impairment
losses.

What amount of financial asset Omar Company should continue to recognize in its December
31, 2023 statement of financial position?
a. none
b. 10,000
c. 290,000
d. 300,000

23. On January 1, 2023,Emerson Company sold a land with a carrying amount of 7,100,000 for a
9,700,000 non-interest bearing note due January 1, 2026. There is no established exchange
price for the land. The prevailing rate of interest for a note of this type on January 1, 2023
was10%. The present value of 1 at 10% for three periods is .75.

1. In Emerson’s 2023 statement of comprehensive income, what amount should be

reported as interest income?
a. 750,500
b. 727,500
c. 700,500
d. 800,770

2. In Emerson’s 2023 statement of comprehensive income, what amount should be as

gain or loss on sale of land?
a. 727,500 loss
b. 727,500 gain
c. 175,000 loss
d. 175,000 gain
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24. Joshtin Company reported the following balances after adjustment at year-end:
2021 2022
Accounts Receivable. 6,360,000 4,780,000
Net Realizable Value. 6,050,000 4,520,000

During 2022, the entity wrote off accounts totaling 148,500 and collected 52,000 on accounts
written off in previous year. What amount should be recognized as doubtful accounts expense
for the year ended December 31,2022?
a. 169,500
b. 196,500
c. 198,500
d. 169,050
e. 46,500

25. Hacienda Santibanez sold a tract of land with a carrying amount of 3,000,000 to Hacienda
Portalejo on July 1, 2022. 1,200,000 was collected on the date of sale, and the balance of
2,800,000 is collectible in four annual installments 902,500, consisting of principal and 11%
interest on the unpaid balance. The first annual installment is due July 1, 2023.

What amount of notes receivable should be classified as current assets on December 31, 2023?
a. 594,500
b. 659,895
c. 781,198
d. 902,500

2. How much should be the interest income for the year December 31, 2023?
a. 121,303
b. 154,000
c. 275,303
d. 308,000

3. What amount of notes receivable should be classified as noncurrent assets on December

31, 2023?
a. 2,800,000
b. 1,210,500
c. 1,545,605
d. 2,205,500