PROBLEM NO.

1 - Yesterday Company
Question no. 1
Year Charge sales AR writen-off Recoveries Accounts
uncollectible
2001 600,000 15,300 600 14,700
2002 1,500,000 37,200 2,400 34,800
2003 1,800,000 51,000 3,000 48,000
3,900,000 103,500 6,000 97,500
Uncollectible accounts (2001 to 2003) 97,500
Divide by charge sales (2001 to 2003) 3,900,000
Percentage of uncollectible accounts to charge sales 2.50% B

Questions no. 2 to 4
(A) (B) (C) (D) (E)
(A) x 2.5% (B) - [(C) -(D)]
Year Charge sales Est. doubtful AR Recovery Allowance
Accounts writen-off to be set up

2004 1,950,000 48,750 39,000 3,600 13,350

2005 1,650,000 41,250 8,400 - 32,850
3,600,000 90,000 47,400 3,600 46,200

Recorded doubtful accounts expense (sum of 2005 write-offs) 54,600

Should be balance of doubtful accounts expense for 2004 41,250
Overstatement of doubtful accounts expense 13,350

No. 2 41,250 D
No. 3 13,350 A
No. 4 853,800 B (P900,000 - P46,200)

Adjusting entry:
Bad Debt Recovery 3,600
Retained Earnings (see below) 55,950
Allowance for Doubtful Accounts 46,200
Doubtful Accounts Expense 13,350

2001 2002 2003 2004 Total

Doubtful account exp provided 3,300 15,000 34,800 43,200 96,300
Less recoveries - 600 2,400 3,000 6,000
Net doubtful account exp 3,300 14,400 32,400 40,200 90,300
Should be prov for D/A exp 15,000 37,500 45,000 48,750 146,250
Over (under) (11,700) (23,100) (12,600) (8,550) (55,950)
PROBLEM NO. 2 - Help Corporation
1A
Aging Category Balance Percent Allowance
November-December 2005 2,280,000 2% 45,600
July-October 2005 1,200,000 15% 180,000
January-June 2005 800,000 25% 200,000
Prior to January 1, 2005 140,000 * 80% 112,000
Total 4,420,000 537,600
* P260,000 - P120,000
2C
Required allowance, 12/31/05 (see no. 1) 537,600
Write-offs for 2005 (P180,000 + P120,000) 300,000
Recovery in 2005 of bad debts written off (30,000)
Allowance, 1/1/05 (260,000)
Doubtful accounts expense for 2005 547,600
3B
Required allowance, 12/31/05 (see no. 1) 537,600
Allowance, 12/31/05, per records:
Allowance, 1/1/05 260,000
Recorded provision for 2005 (P18,000,000 x 2%) 360,000
Recovery in 2005 of bad debts written off 30,000
Write-offs for 2005 (P180,000 + P120,000) (300,000) 350,000
Increase in allowance 187,600

PROBLEM NO. 3 - Don't Let Me Down Corporation

1C
Year 0-30 days 31-60 days 61-90 days 91-120 days over 120 days
2004 0.30% 1.80% 12.00% 38.00% 65.00%
2003 0.50% 1.60% 11.00% 41.00% 70.00%
2002 0.20% 1.50% 9.00% 50.00% 69.00%
2001 0.40% 1.70% 10.20% 47.00% 81.00%
2000 0.90% 2.00% 9.70% 33.00% 95.00%
Total 2.30% 8.60% 51.90% 209.00% 380.00%
Average 0.46% 1.72% 10.38% 41.80% 76.00%
AR balance
Age of accounts 12/31/2005 Rate Allowance
0 30 days 1,264,800 0.46% 5,818.08
31 60 days 691,500 1.72% 11,893.80
61 90 days 288,600 10.38% 29,956.68
91 120 days 114,975 41.80% 48,059.55
over 120 days 59,100 76.00% 44,916.00
2,418,975 140,644.11
2D
(Debit) Doubtful accounts expense 13,894 *
(Credit) Allowance for Doubtful expense 13,894
* (P140,644 - P126,750)

PROBLEM NO. 4 - I Should Have Known Better Corporation

1C
Current trade notes receivable:
Eleanor 2,400,000
Sgt. Pepper 3,600,000
6,000,000

2B
Mabelle (P1,200,000 x 24% x 3/12) 72,000
Eleanor (P2,400,000 x 24% x 2/12) 96,000
Sgt. Pepper (P3,600,000 x 18% x 1/12) 54,000
Ms. Anna (P4,800,000 x 12% x 1/12) 48,000
270,000
 A B C D
1 Cash on hand and in bank 38,700 35,002 34,402 35,502
2 Notes receivable 4,000 4,500 5,000 5,500
3 Accounts receivable 36,000 40,000 42,000 38,000
4 Allow. for doubtful accounts 1,800 2,000 2,100 1,900
5 Accounts receivable-net 40,100 38,000 40,000 39,900
6 Accounts receivable-others 2,750 - 500 1,000
7 Advances to officers and employees 3,840 1,000 2,840 3,740
8 Marketable securities 13,000 10,750 8,500 4,250
9 Allow. for decline in MV of marketable sec. 1,375 250 1,125 -
10 Inventories 15,400 20,000 24,600 16,000
11 Prepayments 100 500 - 900
12 Total curent assets 111,904 113,302 113,950 112,802
13 Property, plant and equipment 990,000 1,910,000 910,000 940,000
14 Accumulated depreciation 346,000 344,000 350,000 356,000
15 PPE-net 566,000 1,566,000 606,000 584,000
16 Total assets 677,904 713,950 679,302 678,802
17 Accounts payable 600 4,000 5,200 2,800
18 Accrued expenses 2,800 4,000 5,200 1,200
19 Total current liabilities 2,800 5,200 4,000 1,200
20 Bonds payable 397,000 400,000 363,000 360,000
21 Bond discount 37,000 3,000 43,000 40,000
22 Total liabilities 400,000 405,200 363,000 368,200
23 Common stock 311,102 200,000 108,750 308,750
24 Retained earnings, end. 125,104 108,750 111,102 94,750
25 Net sales 944,000 948,000 950,000 952,000
26 Cost of sales 669,600 665,000 661,000 664,400
27 Gross Profit 280,400 282,400 285,000 287,000
28 Operating expenses 270,798 264,798 270,000 264,000
29 Operating income 23,602 15,000 17,602 18,400
30 Other income 5,000 7,250 5,500 7,750
31 Other charges 6,500 9,000 6,000 3,000
32 Net income 16,352 11,000 17,000 14,000
33 Gain on sale of Maretable securities-SMC 1,000 2,250 1,750 -
34 Bond discount amortization 1,000 4,000 3,000 -
35 Dividend income-SMC Co. common 1,000 500 2,000 1,500