AUDIT OF RECEIVABLES 1.

The following T-account summarizes the transactions affecting the accounts

receivable of Charry Company for 19x6: ot vocc,a,vy) Ale", 1,44,4" ig 0.4.4Cer-Accounts Receivable t_
Beginning balance after deducting credit balances of P3,000 Charge sales Charge for goods out on
consignment -,,s.i-0-`.13 cad_
SS I'll. I 9
written off but recovered customer for the 1 credit balance on contract Claim against common carrier
for shipping damages-010.1-',*0-44A. 1,500 1, IOUs from employees -64..6 .W.1,6.1.1.644 500 A Cash
advance to affiliate 10,0001c Advance to supplier - (kAvo..4.4. 5,000-K
4_ P53,000 625,000
5,000 )( 0 000 A 1,000 / Collections on carrier dawns Collection on subscription 15,000fd
t' Collections from customers, -4amsivitat.coot. including overpayment of P5,000 P620,000 Write offs
1E4 h a. a. ..4.4;* *-meire.it 3,500 64,44 Pik Merchandise returns 2,500' Allowance to customers *Am_
dama9es Pe-
2,5001- 15,000 x
ectsk 100 AIR
Required: Compute for the correct balance of accounts-receivable.
its
Sc( ,..Sto
2, You were given the following data relative to your audit of the Accounts Receivable of your client.
Demo, Inc. for the year ended_ December 31, 19x6: a. The December 31, 19x6 debit balance in the
Accounts Receivable P197,000. The only entries in the Bad Debts expense account were: 1. December 1,
19x6 credit entry of P324. This is the remittance of4ustomer AkDemo has previously written off this
amount last October 31, 19x6. Aito A cask, w opt 2. A debit on December 31 for P9,850 representing
the adjustment to th Allowance for doubtful account. 3. The Allowance for Doubtful Accounts schedule
is shown below:
61) 0^-
51;1
control account is `41" 904/Y42..
January 1, 19x6 October 21, 19x6, Write-offs: Co. A, P324; Co, B, P820; Co. C, P564 December 31, 19x6,
5% of P197,000
Debit Credit
P1,508
P9,850
Balance P 3,658 aog- 1,5Ze 2,150e)IXe 12,000c
3,4,s1
may'2%= - Ni aging schedule of the accounts receivable as of December 31, 19x6 including some findings
are shown in the table below:
Amount to which the Allowance is to be Net Debit adjusted after Adjustments and Aqe Balance
corrections have been made
0-1 month P93,240 1 percent 1-3 months 76,820 2 percent 3-6 months 22, 180 3 ercent,L)4 Over 6
months 6,000 Definitely)uncollectibles are P1,000-0' P2,000 is considered 50% uncollectible; Si.. Icte
,p10 the remainder is estimated to be 80% collectible
There is a credit balance of P2,000 n the account receivable (0-1 month); it represents an advance on a
sales contract.
Also, therei is a credit balance of P500 in one of the 1-3 months accounts receivable for which
merchandise will be accepted by the customer.
The ledger accounts have not been closed as of December 31, 19x6. The Accounts Receivable control
accounts is not in agreement with the subsidiary ledger. The difference cannot be located, and the
auditor decides to adjust the control to the total of the subsidiaries ledger after corrections are made.
Required: Compute for the adjusted balances of Accounts Receivable and Allowance for doubtful
accounts as of the end of the year.
ReSA: The Review School of Aaxiuntoncy Page 8 of 9
Note receivable from sale of plant P4,500,000 Note receivable from officer 1,200,000
In connection with your audit, you were able to gather the following transactions during 2008 and other
information pertaining to the company's tong-term receivables: a. The note receivable form, sale of
plant 'bears interest at,<2/0 per annum. The note is payable in 3 annual installments of P1,500,000 plus
interest on the unpaid balance every April 1. The initial principal and interest payment was made on
Aprii 1, 2008. NA. b. The note receivable from officer is dated December 31, 2007, earnsdnierest at fla%
per annum, and is ue on December 31, 2010. The 2008 interest was received on
December 31, 2008. c. The corporation s d apiece of ipment to SNOW INC. on April 1, 2008, in exchange
for an P600,00 non interest _ wring note di. jecir 21 A ril 1, 2010. The note had no ready market, and
there was no established exchange price for the equipment. The prevailing interest rate for a note of
this type at April 1, 2005 was 12%. The present value factor of 1 for two periods at 12% is 0.797 while
the present value factor of ordinary annuity of 1 for two periods at 12% is 1.690.
d. A tract of land was sold by the corporation to WHITE CO. on July 1, 2008, for P3,000,000, under an
installment sale contract. White signed a 4-year 11% note for P2,100,000 on July 1, 2008, in addition to
the down payment of P900,000. The equal annual payments of principal and interest on the note will be
P67 ,875 payable on July 1, 2009, 2010, 2,011, and 2012. The land had an established cas price of
P3,000,000, and its cost to the corporation was P2,250,000. The collection f the installments on this note
is reasonably assured.
of Anir,v fort evi ifkkg.-
V 1. How much is the total noncurrent notes receivables as of December 31, 2008? a. 6,778,200 b.
4,832,325 c. 5,278,200 d. 4,875,363 k 2. How much is the total- current portion of long-term notes
receivable as of December-31, -- -2008? a. 1,945,875 b. 2,176,875 c. 1,500,000 d. 0 P`` 3. What is the
accrued interest receivable as of December 31, 2008? a. 385,500 b. 428,538 c. 270,000 d. 505,500 ' 4.
What is the correct interest income for the year 2008? a. 640,500 b. 818,538 c. 683,538
SOLUTION GUIDE:
d. 756,000
NON CURRENT CURRENT INTEREST RECEIVABLE INTEREST NCOME A. Se,riva,Note,Rece&vaIvie. - rte.,,
i1 st.14 1,2:0_,90r) aio coo gio;u0._ o4- col(suRevc. 1 oo ) cob 4 1 7,4 -o - -o - iii,5 -o_ -o - . Term,
Note., Receiyabie. -0 v, Ai *PIXO q30138 C. Non, ivitere4t- Bea-1444o- 4/1/08 @ P600,000*.797 .--
P478,200 12/31 A vnor. 4303i Bcact,nce. sm.40-a8 il D. I navantemt itece4A,cavIE. 1%640 (#45+1-6
1,1Sft_ 11515bb 7/1/08 P676,875 A ittA.,-rt (9..51t BalaAlze, ity_54g73 Total/
AlliliTTAIC. PRAM FMC recs.' Aran DOCPTUActi C.