BAIACC1 INTERMEDIATE ACCOUNTING 1

Receivables Exercises

Accounts Receivables

1. Roxy Company provided the following information relating to accounts receivable for 2022:
Accounts receivable on January 1 1,300,000
Credit sales 5,400,000
Collections from customers, excluding recovery 4,750,000
Accounts written off 125,000
Collection of accounts written off in prior year
(customer credit was not reestablished) 25,000
Estimated uncollectible receivables per aging
of receivables at December 31 165,000
On December 31, 2022, what is the balance of accounts receivable, before allowance for doubtful accounts?

2. Jay Company provided the following data relating to accounts receivable for 2022:
Accounts receivable, January 1 650,000
Credit sales 2,700,000
Sales return 75,000
Accounts written off 40,000
Collections from customers 2,150,000
Estimated future sales return\s at December 31 50,000
Estimated uncollectible accounts at 12/31 per aging 110,000
What amount should be reported as net realizable value of accounts receivable on December 31, 2022?

Wonder Company provided the following transactions affecting accounts receivable during the year ended
December 31, 2022:

Sales (cash and credit) 5,900,000

Cash received from credit customers, all of whom
took advantage of the discount feature of the
entity’s credit terms 4/10,n/30 3,024,000
Cash received from cash customers 2,100,000
Accounts receivable written off as worthless 50,000
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 accounts receivable written off as
uncollectible in prior periods (not included in
cash amount stated above) 80,000

The following balances were taken from the January 1, 2022 statement of financial position:

Accounts receivable 950,000

Allowance for doubtful accounts 100,000

The entity provided for doubtful accounts by crediting allowance for doubtful accounts at P70,000 for the
current year.

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

b. What is the balance of the doubtful accounts on December 31, 2022?
3. Orr Company prepared an aging of account receivable on December 31, 2022 and determined that the net
realizable value of the accounts receivable was P2,500,000.

Allowance for doubtful accounts on January 1 280,000

Accounts written off as uncollectible 230,000
Accounts receivable on December 31 2,700,000
Uncollectible accounts recovery 50,000
 For the year ended December 31, 2022, what amount should be recognized as doubtful account expense?
4. Bicolano Company used the statement of financial position approach in estimating uncollectible accounts
expense. The entity prepared an adjusting entry to recognize this expense at the end of the year. During the
year, the entity wrote off a P100,000 receivable and made no recovery of previous write off. After the adjusting
entry for the year, the credit balance in the allowance for doubtful accounts was P250,000 larger than it was
on January 1. What amount of uncollectible account expense was recorded for the year?
5. Roxanne Company used the allowance method of accounting for uncollectible accounts. During 2023, the
entity had charged P800,000 to bad debt expense, and wrote off accounts receivable of P900,000 as
uncollectible. What was the decrease in working capital?

6. At the beginning of the current year, Tenacious Company showed the following account balances:

Accounts Receivable 2,000,000

Allowance for uncollectible accounts 80,000

The following summary transactions occurred during the current year:

a. Sales on account, 2/10/n/30 14,000,000
b. Collections from customers within the discount period 4,900,000
c. Collections from customers beyond the discount period 7,800,000
d. Accounts receivable written off as worthless 60,000
e. Recovery of accounts previously written off, not
included in the above collections 20,000
f. Credit memo for sales returns 140,000

Required:
a. Prepare journal entries pertaining to the above transactions relating to accounts receivable.
b. Prepare the adjustment for doubtful accounts at year-end if the entity uses percentage of accounts
receivable method consistently.
c. What is the net realizable of accounts receivable at year end?

Notes Receivables

1. Use the following information for the next three (3) questions:
On January 1, 2022, Subaru Company sold a transportation equipment with a historical cost of P1,000,000
and accumulated depreciation of P300,000 in exchange for cash of P100,000 and a noninterest bearing note
receivable of P800,000 due on January 1, 2025. The prevailing rate of interest for this type of note is 12%.
The present value of 1 at 12% for 3 periods is .71178.
1. What is the initial carrying amount of the note receivable on January 1, 2022?
2. How much is the interest income in 2022?
3. How much is the carrying amount of the receivable on December 31, 2023?

2. Questions 4, 5 and 6 are related to the following information:

On January 1, 2023, Teddy Company sold a tract of land for P5,250,000 to Magic Corporation. Magic
Corporation paid P1,250,000 and signed a noninterest bearing note for the balance which is due on January
1, 2026. There was no established exchange price for the land and the note had no ready market. The
prevailing interest rate for this type of note was 12%. The present value of 1 at 12% for 3 periods is .71178.

4. How much is the interest income for year 2023?

5. How much is the carrying amount of the note on December 31, 2023?
6. How much was the current portion of the note on December 31, 2023?

3. Use the following information for the next two questions:

On January 1, 20x1, ABC Co. sold inventory costing ₱1,800,000 with a list price of ₱2,200,000 and a cash
price of ₱2,000,000 in exchange for a ₱2,400,000 noninterest bearing note due on December 31, 20x3.

7. How much is the initial measurement of the receivable?

8. How much is the carrying amount of the receivable on December 31, 20x1?

4. Arianne Company purchased a machine with a fair market value of P750,000 bi signing a note requiring ten
equal annual payments. The stated interest rate was 8%.
9. Compute the amount of equal payments if the first payment is made immediately.
 10. Compute the amount of the equal payments if the first payment is made at the end of the first year.

5. On January 1, 2023, ALPS Bus Co. received a 4-year noninterest bearing note of P1,000,000 in exchange for
land with carrying amount of P500,000. The note is due on December 31, 2026. The effective interest rate is
14%.
10. Prepare the amortization table.
11. Prepare the necessary journal entries.
6. On January 1, 2021, Speedy Co. received a P1,000,000, noninterest bearing note in exchange for land with
carrying amount of P1,000,000. The note is due in four equal annual installments every December 31. The
effective interest rate is 12%.
12. Prepare the amortization table.
13. Determine the current and non-current portion of the note on December 31, 2021.
14. Prepare all the necessary journal entries.

7. On January 1, 20x1, Otters Co. received a 3-year, noninterest bearing note of ₱1,200,000 in exchange for
equipment with historical cost of ₱2,000,000 and accumulated depreciation of ₱700,000. The note is due in
three equal annual installments beginning on January 1, 20x1 and every January 1 thereafter. The effective
interest rate is 10%.
Requirements:
15. Prepare the amortization table.
16. How much is the interest income in 20x1?
17. How much is the carrying amount of the receivable on Dec. 31, 20x1?
Additional Concepts
1. Security bank granted a loan to a borrower on January 1, 2023. The interest on the loan is 10%
payable annually starting December 31, 2023. The Loan matures in 3 years on December 31,
2023.

Principal Amount 4,000,000

Direct Origination 150,000
Origination fee received from the borrower 342,100

After considering the origination fee received from the borrower and the direct origination cost incurred,
the effective rate on the loan is 12%.

Required: Prepare journal entries for 2023, 2024, 2025.

2. Lucy Company showed the following balances on December 31:

Accounts receivable – unassigned 1,000,000
Accounts receivable – assigned 300,000
Allowance for doubtful accounts – Jan. 1 30,000
Receivable from factor 40,000
Note payable – bank 240,000

During the same year, the entity found itself in financial distress and decided to resort to receivable
financing. On June 30, the entity factored P200,000 of accounts receivable to finance the entity. The
finance entity charged a factoring fee of 5% of the accounts factored and withheld 20% of the amount
factored. On December 31, the entity assigned P300,000 of the accounts receivable to a bank under a
non-notification basis. The bank advanced 80% less a service fee of 5% of the accounts assigned. The
entity signed a promissory note for the loan. On December 31, it is estimated that 5% of the outstanding
accounts receivable may prove uncollectible.

Required:
a. Prepare journal entry to record the factoring.
b. Prepare journal entry to record the assignment.
c. Prepare the entry to adjust the allowance for doubtful accounts on December 31.
d. Indicate the classification, presentation and disclosure of the accounts receivable involved in
receivable financing.
3. Mythical Company provided the following transactions:
April 5 Received from A, a customer, P500,000, 60-day, 12% note, dated April 4, in payment of an
account.
April 19 The note of A was discounted with the bank at 14%.May 3 Received a P1,000,000, 30-day
noninterest bearing note dated May 1 from B, in payment of an account.
May 16 The note of B was discounted with the bank at 12%.
 May 25 Received from C, a customer, a P1,500,000, 60-day 12% note dated May 15 and made by
Company X. Gave the customer credit for the maturity value of the note less discount at 12%.
June 7 Received notice from the bank that the note of A was not paid on maturity. Paid bank the
amount due plus protest fee and other charges of P20,000.
June 15 Received a 60-day, 12% note, P800,000 dated June 15, from D, a customer for sale of
merchandise.
June 18 Received full payment from A including interest of 12% on total amount due from maturity
date of original note.

Required:
a. Prepare journal entries to record the transactions assuming any discounting of note
receivable is accounted for as conditional sale with recognition of a contingent liability.
b. Prepare the necessary adjustments on June 30

Problem 2

Problem 3

Problem 4

Problem 5