Department of Accountancy and Taxation

COLLEGE OF ARTS AND SCIENCES

San Beda College

CASH AND RECEIVABLES

THEORIES

1. Which of the following items should not be included in the Cash caption on the balance sheet?
a. Coins and currency in the cash register
b. Checks from other parties presently in the cash register
c. Amounts on deposit in checking account at the bank
d. Postage stamps on hand

2. A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of
cash and
a. is acceptable as a means to pay current liabilities.
b. has a current market value that is greater than its original cost
c. bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation.
d. is so near its maturity that it presents insignificant risk of changes in interest rates.

3. Bank overdrafts, if material, should be

a. reported as a deduction from the current asset section.
b. reported as a deduction from cash.
c. netted against cash and a net cash amount reported.
d. reported as a current liability.

4. Deposits held as compensating balances

a. usually do not earn interest.
b. if legally restricted and held against short-term credit may be included as cash.
c. if legally restricted and held against long-term credit may be included among current assets.
d. none of these.

5. The category "trade receivables" includes

a. advances to officers and employees.
b. income tax refunds receivable.
c. claims against insurance companies for casualties sustained.
d. none of these.

6. Which of the following should be recorded in Accounts Receivable?

a. Receivables from officers
b. Receivables from subsidiaries
c. Dividends receivable
d. None of these

7. What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies
on a balance sheet?
a. As offsets to capital.
b. By means of footnotes only.
c. As assets but separately from other receivables.
d. As trade notes and accounts receivable if they otherwise qualify as current assets.

8. When a customer purchases merchandise inventory from a business organization, she may be given a
discount which is designed to induce prompt payment. Such a discount is called a(n)
a. trade discount.
b. nominal discount.
c. enhancement discount.
d. cash discount.

9. Trade discounts are

a. not recorded in the accounts; rather they are a means of computing a price.
b. used to avoid frequent changes in catalogues.
c. used to quote different prices for different quantities purchased.
d. all of the above.

10. If a company employs the gross method of recording accounts receivable from customers, then sales
discounts taken should be reported as
a. a deduction from sales in the income statement.
b. an item of "other expense" in the income statement.
c. a deduction from accounts receivable in determining the net realizable value of accounts receivable.
d. sales discounts forfeited in the cost of goods sold section of the income statement.
11. Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the
cash to be received in the future, failure to follow this practice usually does not make the balance sheet
misleading because
a. most short-term receivables are not interest-bearing.
b. the allowance for uncollectible accounts includes a discount element.
c. the amount of the discount is not material.
d. most receivables can be sold to a bank or factor.

12. Which of the following methods of determining bad debt expense does not properly match expense and
revenue?
a. Charging bad debts with a percentage of sales under the allowance method.
b. Charging bad debts with an amount derived from a percentage of accounts receivable under the
allowance method.
c. Charging bad debts with an amount derived from aging accounts receivable under the allowance method.
d. Charging bad debts as accounts are written off as uncollectible.

13. Which of the following methods of determining annual bad debt expense best achieves the matching concept?
a. Percentage of sales
b. Percentage of ending accounts receivable
c. Percentage of average accounts receivable
d. Direct write-off

14. Which of the following is true when accounts receivable are factored without recourse?
a. The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the
substance of the transaction.
b. The receivables are used as collateral for a promissory note issued to the factor by the owner of the
receivables.
c. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables.
d. The financing cost (interest expense) should be recognized ratably over the collection period of the
receivables.

15. Which of the following is not true?

a. The imprest petty cash system in effect adheres to the rule of disbursement by check.
b. Entries are made to the Petty Cash account only to increase or decrease the size of the fund or to adjust
the balance if not replenished at year-end.
c. The Petty Cash account is debited when the fund is replenished.
d. All of these are not true.

16. A Cash Over and Short account

a. is not generally accepted.
b. is debited when the petty cash fund proves out over.
c. is debited when the petty cash fund proves out short.
d. is a contra account to Cash.

17. The journal entries for a bank reconciliation

a. are taken from the "balance per bank" section only.
b. may include a debit to Office Expense for bank service charges.
c. may include a credit to Accounts Receivable for an NSF check.
d. may include a debit to Accounts Payable for an NSF check.

18. When preparing a bank reconciliation, bank credits are

a. added to the bank statement balance.
b. deducted from the bank statement balance.
c. added to the balance per books.
d. deducted from the balance per books.

19. Which of the following events does not necessarily provide objective evidence that a receivable is impaired?

a. A downgrade of the debtor’s credit rating.

b. Significant financial difficulty of the debtor.

c. Bankruptcy proceedings undertaken by the debtor.

d. Default or delinquency in interest or principal payment.

20. Unreplenished petty cash vouchers at balance sheet date will require adjustment to avoid

a. Overstatement of both asset and expense

b. Understatement of both asset and expense

c. Understatement of asset and overstatement of expense

 d. Overstatement of asset and understatement of expense

PROBLEMS:

1. OA Company reported the following information at the current year-end:

 Investment securities of 1,500,000. These securities are share investments in entities that are traded in the
PSE. As a result, the shares are very actively traded in the market.

 Investment securities of 1,500,000. These securities are government treasury bills. The treasury bills have a
9-year term and purchased on December 31 at which time they had two months to go until they mature.

 Cash of 3,000,000 in the form of coin, currency, saving account and checking account.

 Investment securities of 2,000,000. These securities are commercial papers. The term of the papers is nine
months and they were purchased in December 31 at which time they had three months to go until they mature.

What is the total amount should be reported as cash and cash equivalent at the current year-end?

2. On December 31, 2014, the cash account of Difficult Company showed the following information:

Undeposited collections 50,000

Cash in bank – BPI Checking account 300,000

Cash in bank – BDO(Overdraft) 20,000

Undeposited NSF check received from customer dated December 2, 2014 30,000

Undeposited check from a customer, dated February 2, 2015 10,000

Cash in bank - BPI( Payroll account) 200,000

Cash in bank – BPI(Saving Deposit) 100,000

Cash in bank – BPI(Money market instrument, 90 days) 1,500,000

Cash in foreign bank(restricted) 500,000

Sinking fund cash 600,000

Financial asset held for trading 220,000

What is the total amount should be reported as “cash and cash equivalent” on December 31,2014?

3. Burn Company had the following account on December 31 2012:

Cash in bank 2,540,000

Cash on hand 265,000

Cash restricted for addition to plant(expected to be disbursed in 2013) 1,580,000

Cash in bank included 500,000 of compensating balance against shot-term borrowing arrangement. The compensating
balance is not legally restricted as to withdrawal. In the December 31, 2012 statement of financial position, what total
cash should be reported under current assets?

4. Tinik Company had the following account balances on December 31, 2013.

Petty cash fund 45,000

Cash in bank – current account 5,400,000

Cash in bank – sinking fund 1,900,000

Cash on hand 440,000

Cash in bank – restricted account for plant addition, 2,000,000

expected to be disbursed in 2014

Treasury bills 900,000

The petty cash fund included unreplenished December 2013 petty cash expense of 15,000 and employee IOU of 5,000.
The cash on hand included a200,000 check payable to Tinik dated January 10, 2014. In exchange for a guaranteed
line of credit, the entity has agreed to maintain a minimum balance of 300,000 in its unrestricted current bank account.
The sinking fund is set aside to settle a bond payable that is due on June 11, 2014.

What is the total amount should be reported as “cash and cash equivalents” on December 31, 2013?

5. IOU Company reported that the cash account per ledger had a balance at December 31, 2010 of 5,000,000
which consisted of the following:

Petty cash fund 50,000

Undeposited receipts, including postdated customer check for 100,000 1,550,000

Cash in PNB, per bank statement, with a check for 45,000 still outstanding 2,000,000

Bond sinking fund 900,000

Vouchers paid out of collection, not yet recorded 340,000

IOU’s signed by employees, taken from collections 160,000

5,000,000

What amount should be reported as cash in the December 31, 2010 statement of financial position?

6. Gunbound Company's month-end bank statement showed a balance of P3,600,000. Outstanding checks
amounted to P1,200,000, a deposit of P400,000 was in transit at month-end, and a check for P50,000 was
erroneously charged by the bank against the account. What is the correct balance in the bank account at
month-end?

7. The accounts of Ragnarok Company showed the following facts on February 28, 2013.

Balance of cash in bank account 1,300,000

Balance of bank statement 1,200,000
Outstanding checks, August 31:
Number 555 10,000
761 55,000
762 40,000
763 25,000
764 65,000
765 70,000
Receipts of August 31, deposited September 1 275,000
Service charge of August 5,000
NSF check received from a customer 85,000

The cashier-bookkeeper had misappropriated P30,000 and an additional P10,000 by charging sales discounts and
crediting accounts receivable. The stub for check number 765 and the invoice relating thereto show that it was for
P50,000. It was recorded incorrectly in the cash disbursements journal as P70,000. This check was drawn in payment
of an account payable. Payment has been stopped on check number 555 which as drawn in payment of an account
payable. The payee cannot be located. What is the adjusted cash in bank on February 28, 2013?

8. The cash account of Point Blank Company showed a balance of P4,500,000. The bank statement did not
include a deposit of P230,000 made on the last day of the month. The bank statement showed a collection by
the bank of P94,000 and a customer's check for P32,000 returned because it was NSF. A customer's check
for P45,000 was recorded on the books as P54,000, and a check written for P79,000 was recorded as
P97,000. What is the correct balance in the cash account?

9. Carrie Company provided the following data pertaining to the cash transactions and bank account for May of
the current year:

Cash balance per accounting period 1,719,000

Cash balance per bank statement 3,195,000
Bank service charge 10,000
Debit memo for the cost of printed checks delivered
by the bank; the charge has not been recoded in
the accounting record 12,000
Outstanding checks 685,000
Deposit of May 30 not recorded by bank until June 1 500,000
Proceeds of a bank loan on May 30, not recorded in
the accounting record, net of interest of P30,000 570,000
Proceeds from a customer's promissory note, principal
amount P800,000 collected by the bank not taken
up in the accounting record with interest 810,000
Check No. 1086 issued to a supplier entered in the
accounting record as P210,000 but deducted in the
bank statement at an erroneous amount of 120,000
Stolen check lacking an authorized signature deducted
from Carrie's account by the bank in error 80,000
Customer's check returned by the bank in error
indicating that the customer's balance was not
adequate to cover the check; no entry has been
made in the accounting record to record the
returned check 77,000

What is the adjusted cash in bank?

10. The cash account in the ledger of Assault Company shows a balance of P1,652,000 at December 31. The
bank statement, however, shows a balance of P2,090,000 at the same date. The only reconciling items consist
of a bank service charge of P2,000, a large number of outstanding checks totaling P590,000 and a deposit in
transit. What is the deposit in transit in the December 31 bank reconciliation?

11. At year-end, EP Company reported cash and cash equivalents comprising cash on hand 250,000, demand
deposit 1,000,000, postdated customer’s check 150,000, petty cash fund 25,000, traveler’s check 100,000,
manager’s check 50,000 and money order 75,000. What total amount of cash should be reported at year-
end?

12. In preparing the August 31, 2013 bank reconciliation, CMC Company provided the following information:

Balance per bank statement 902,500

Deposit in transit 162,500
Return of customer’s check for insufficient fund 30,000
Outstanding checks 137,500
Bank service charge for August 5,000

On August 31, 2013, what is the adjusted cash in bank?

13. In preparing the bank reconciliation on December 31, 2013, PJG Company provided the following information:

Balance per bank statement 1,900,000

Deposit in transit 260,000
Amount erroneously credited by bank to PJG account 20,000
Bank service charge for August 5,000
Outstanding checks 337,500

What is the adjusted cash in bank on December 31, 2013?

14. In an audit of ULR Company on December 31, 2013, the following data are gathered

Balance per book 500,000

Bank charge 1,500
Outstanding checks 117,500
Deposit in transit 150,000
Customer note collected by bank 187,500
Interest on customer note 7,500
Customer check returned NSF 31,000
Depositor’s note charged to account 125,000

What is the adjusted cash in bank on December 31, 2013?

 15. ZLB Company provided the following data for the purpose of reconciling he cash balance per book with the
balance per bank statement on December 31, 2013:

Balance per bank statement 1,000,000

Outstanding checks (including certified check of 50,000) 250,000
Deposit in transit 100,000
December NSF checks (of which 25,000 had been redeposited and cleared
by December 27) 75,000
Erroneous credit to Core’s account, representing proceeds of loans
granted to another company 150,000
Proceeds of note collected by bank for ZLB, net of service charge of 10,000 375,000

What is the cash in bank to be reported on December 31, 2013?

16. MJJ Company keeps all its cash in a checking account. An examination of the entity’s accounting records and
bank statement for the month ended June 30, 2013 revealed the following information:
** The cash balance per book on June 30 is 4,250,000

** A deposit of 500,000 that was placed in the bank’s night depository on June 30 does not
appear on the bank statement.

** The bank statement shows on June 30, the bank collected note for MJJ and credited the proceeds of
475,000 to the entity’s account.

** Outstanding checks on June 30 amounted to 150,000

** MJJ discovered that a check written in June for 100,000 in payment of an account payable, had been
recorded in the entity’s records as 10,000

** Included with the June bank statement was NSF check for 125,000 that MJJ had received from the
customer on June 26.

** The bank statement shows a 10,000 service charge for June.

What is the cash in bank to be reported in the statement of financial position on June 30, 2013?

17. On December 31, 2013, Busy Company received its bank statement. However, the closing balance of the
account was unreadable. Attempts to contact the bank after hours did not secure the desired information. The
following data are available in preparing bank reconciliation:

November 30 book balance 1 460 000

Note collected by bank 100 000
Interest earned on note 10 000
NSF check of a customer 130 000
Bank service charge on NSF check 2 000
Other bank service charges 3 000
Outstanding checks 202 000
Deposit on November 30 placed in night depository 85 000
Check issued by Buzy company charged to Busy’s account 20 000

What is the cash balance per bank statement?

18. Shinn Company’s bank statement for the month of April included the following information:

Ending balance, April 30 2 800 000

Bank service charge for April 12 000
Interest paid by bank to Shinn Company for April 10 000

In comparing the bank statement to its own cash records, the entity found the following:

Deposits made but not yet recorded by the bank 350 000
Checks written and mailed but not yet recorded by the bank 650 000

In addition, the entity discovered that it had drawn erroneously recorded a check for P46 000 that should have been
recorded for P64 000.
What is the cash balance per ledger on April 30?

19. On July 31. 2013, the bank statement of Rose Company had an ending balance of P3 735 000. The following
data were assembled in the course of reconciling the bank balance:
 The bank erroneously credited Rose Company for P21 000on July 25.
 During the month, the bank charged back NSF checks amounting to P23 000 of which P8 000 had been
redeposited by July 28.
 Collection for July 31 totaling P103 000 was deposited the following month.
 Checks outstanding on July 31 amounted to P302 000.
 Note collected by the bank for Rose Company was P80 000 and the corresponding bank charge was P5 000.

What is the unadjusted cash in bank per ledger on July 31, 2013?

20. Betty Company’s bank statement for the month of March included the following information:

Bank service charge for March 15 000

Check deposited by Betty during March was not collectible
and has been marked “NSF” by the bank and returned 40 000

In comparing the bank statement to its own records, the entity found the following:

Deposits made but not yet recorded by bank 130 000

Checks written and mailed but not yet recorded by bank 100 000

All deposits in transit and outstanding checks have been properly recorded in the entity’s book.

A customer’s check for P35 000 payable to Betty Company had not been recorded by the entity. The cash in bank
account balance per ledger is P920 000.

What is the adjusted cash in bank on March 31?

21. Sugarfree Company prepared the following bank reconciliation on August 31:

Book balance 1 405 000

Add: July 31 deposit 750 000
Collection of note 2 500 000
Interest on note 150 000 3 400 000
Total 4 805 000

Less: Sugarfree Company’s deposit to

our account 1 100 000
Bank service charge 45 000 1 145 000
Adjusted book balance 3 660 000

Bank balance 5 360 000

Add: Error on check No. 180 45 000
Total 5 675 000

Less: Preauthorized payments for water bills 205 000

NSF check 220 000
Outstanding check 1 650 000 2 075 000
Adjusted bank balance 3 600 000

Check No. 180 was made for the proper amount of P249 000 in payment of account. However, it was entered in the
cash payments journal as P294 000. The entity authorized the bank to automatically pay its water bills as submitted
directly to the bank. What is the adjusted cash in bank on July 31?

22. Butterfly Company prepared the following bank reconciliation on November 30, 3013:
Balance per bank statement 2 800 000
Add: Deposit in transit 195 000
Checkbook printing charge 5 000
 Error made by Butterfly in recording
check No. 35 (issued in November) 35 000
NSF check 110 000 345 000
3 145 000
Less: Outstanding check 100 000
Note collected by bank (includes
P15 000 interest) 215 000 315 000
2 830 000

The entity had P200 000 cash on hand on November 30, 2013. What amount should be reported as cash in the
statement of financial position on November 30, 2013?

23. Polo Company keeps all cash in a checking account. An examination of the entity’s accounting records and
bank statement for the month ended January 31, 2013 revealed a bank statement balance of P8 469 000 and
a book balance of P8 524 000.

A deposit of P950 000 placed in the bank’s night depository on January 28 does not appear on the bank statement.
Checks outstanding on January 31 amount to P270 000.

The bank statement shows that on January 25, the bank collected a note for Polo company and credited the proceeds
of P935 000 to the entity’s account. The proceeds included P35 000, all of which Polo Company earned during the
current period. Polo Company has not yet recorded the said collection.

Polo Company discovered that check number 1000800 written in January for P183 000 in payment of an account had
been recorded in the entity’s records as P138 000.

Included with the January 31 bank statement was an NSF check for P250 000 that Polo Company had received from
Ralph Company on January 25. Polo Company has not yet recorded the returned check. The bank statement shows a
P15 000 service charge for January.

What is the journal entry to adjust the cash in bank on January 31, 2013?

24. While checking the cash account of Black Veil Brides Company on December 31, 2013, the following
information is discovered:

Balance per book 6,776,000

Balance per bank statement (outstanding checks
of P987,000) 6,632,000
Deposit in bank closed by BSP 1,600,000
Deposit in transit 1,234,000
Currency and coins counted 950,000
Petty cash fund (of which P10,000 is in the form of
paid vouchers) 50,000
Bank charges not yet taken up in the book 6,000
Bond sinking fund 1,000,000
Receivables from employees 70,000
Error in recording a check in the book. The correct
amount as paid by the bank is P89,000 instead of
P98,000 as recorded in the book, or a difference of 9,000

What is the adjusted cash in bank on December 31, 2013?

25. Slipknot Company provided the following data for the month of October of the current year:

Balance per book, October 31 3,130,000

Balance per bank statement, October 31 3,500,000
Collections on October 31 but undeposited 550,000
NSF check received from a customer returned by the
bank on November 5 with the October bank statement 50,000
Checks outstanding on October 31 650,000
Bank debit memo for safety deposit box rental not
recorded by depositor 5,000
A creditor’s check for P30,000 was incorrectly
recorded in the depositor’s book as 300,000
A customer’s check for P200,000 was recorded
by the depositor as 20,000
The depositor neglected to make an entry in its books
for a check drawn in payment of an account payable 125,000

What is the adjusted cash in bank on October 31?

26. In reconciling the cash balance on December 31, 2013 with that shown in the bank statement, the following
facts are gathered from the records of Belle Company:

Balance per bank statement 4,000,000

Balance per book 2,700,000
Outstanding checks 600,000
Deposit in transit 475,000
Service charge 10,000
Proceeds of bank loan, December 1,
discounted for 6 months at 12%, not
recorded on Sam Company’s books 940,000
Customer’s check charged back by bank
for absence of counter signature 50,000
Deposit of P100,000 incorrectly recorded by bank as 10,000
Check of Bella Company charged by bank against
Belle Company 150,000
Customer’s note collected by bank in favor of Belle Company.
Face 400,000
Interest 40,000

Total 440,000
Collection fee 5,000 435,000

Erroneous debit memo of December 28, to charge

Belle account with settlement of bank loan 200,000
Deposit of Bella Company credited to Belle account 300,000

What is the adjusted cash in bank on December 31, 2013?

27. In the December 31, 2012 statement of financial composition of Com Company, the current receivables
consisted of the following:

Trade accounts receivable 80,000

Allowance for uncollectible accounts (20,000)
Claim against shipper for goods lost in transit
(November 2012) 30,000
Selling price of unsold goods sent by Com
on consignment at 130% of cost
(not included in Com’s ending inventory) 260,000
Security deposit on lease of warehouse
used for storing some inventories 300,000_
Total 1,500,000

At December 31, 2012, the correct total of current net receivables was

28. The following information is available for Cha-Cha Company relating to 2010 operations:

Accounts receivable, January 1 4,500,000

Accounts receivable collected 8,400,000
Cash sales 2,000,000
Inventory, January 1 4,800,000
Inventory, December 31 4,400,000
Purchases 8,000,000
Gross margin on sales 4,200,000

What is Cha-Cha Company’s accounts receivable balance at December 31, 2010?

29. On December 31, the accounts receivable control account of Sweet Company had a balance of P8,200,000. An
analysis of the accounts receivable showed the following:

Accounts known to worthless 100,000

Advance payments to creditors on purchase orders 400,000
Advances to affiliated companies 1,000,000
Customers’ accounts reporting credit balances arising
from sale returns (600,000)
Interest receivable on bonds 400,000
 Trade accounts receivable – unassigned 2,000,000
Subscription receivable due in 30 days 2,200,000
Trade accounts receivable – assigned (Finance
Company’s equity in assigned accounts is P500,000) 1,500,000
Trade installment 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 whish postdated checks are held
(no entries were made on receipt of checks) 670,000
Total 8,670,000

The correct balance of trade accounts receivables on December 31 should be

30. The statement of financial position of Ice Company shows accounts receivable at January 1, 2012 as follows:

Accounts receivable 450,000

Allowance for doubtful accounts 9,000

During 20012, transactions relating to the accounts receivable were as follows:

Sales on account, P4,800,000

Cash collections of accounts receivable totaled P3,920,000 , after discounts of P80,000 were allowed
for prompt payment
Bad accounts previously written off in prior year amounting to P5,000 were recovered.
The entity decided to provide P26,000 for doubtful accounts by a journal entry at the end of the
year.
Accounts receivable of P700,000 have been pledged to a local bank on a loan of P400,000.
Collections of P150,000 were made on these receivables (not included in the collections previously given) and
applied as partial payment for the loan.

The net realizable value of accounts receivable at December 31, 2012 was
For Questions 21 to 23
On December 1, 2013, Hubby Company assigned specific accounts receivable totaling P2,000,000 as a collateral
for a P1,500,000, 12% note from a certain bank. The entity will continue to collect the assigned accounts
receivable. In addition to the interest of the note, the bank also charged 5% finance fee deducted in advance on
the P1,500,000 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, 2013, the entity remitted the collections to the bank
in payment for the interest accrued on December 31,2013 and the note payable.
31. What amount of cash was received from the assignment of accounts receivable on December 1, 2013?

32. What is the carrying amount of note payable on December 31, 2013?

33. What amount should be disclosed as the equity of Bamboo Company in assigned accounts on December 31,
3013?

34. E Company accepted from a customer P1,000,000 face amount 6-month, 8% note dated April 15, 2010. On
the same date, E Co. discounted the note without recourse at Union bank at a 10% discount rate.

How much cash was received by E Co. from the discounting?

35. What is the loss on note receivable discounting?

36. On December 1, 2012, A Company assigned specific accounts receivable totalling P2,000,000 as collateral
on a P1,500,000, 12% note from a certain bank. A Company will continue to collect the assigned accounts
receivable. In addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance
on the P1,500,000 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, 2012, A Company remitted the collections to
the bank in payment for the interest accrued on December 31, 2012 and the note payable.

Question 1: How much cash was received from the assignment of accounts receivable on December 1, 2012?

37. What should be reported as note payable on December 31, 2012?

38. How much is the equity of A Company in assigned accounts on December 31, 2012?
 39. B Company sold accounts receivable without recourse with face amount of P6,000,000. The factor charged
15% commission on all accounts receivable factored and withheld 10% of the accounts factored as protection
against customer returns and other adjustments. B Company had previously established an allowance for
doubtful accounts of P200,000 for these accounts. By year-end, the entity had collected the factor’s holdback
there being no customer returns and other adjustments.

How much was initially received from factoring?

40. What is the loss on factoring?

41. Epsilon Company sells to wholesalers on terms 5/5, net 30. The entity has no cash sales but 56/100 of the
customer take advantage of the discount. The entity used the gross method of recording sales and accounts
receivable. An analysis of the trade accounts receivable on December 31, 2018 revealed the following:

Age Amount Collectible

0-5 1,500,000 100%
6-10 1,100,000 95%
11-15 1,000,000 70%
16 -30 500,000 69%
31-60 300,000 1%
Over 60 2 0.11%
4,400,002
In the December 31, 2018 statement of financial position, what amount should be reported as allowance for
sales discount?

42. Miku Hatsune Company began operations on January 1, 2019. The entity has found that its estimated bad
debt expense has been consistently higher than actual bad debts. Management proposed lowering the
percentage from 10% of credits to 5%. Credit Sales for 2019 totaled P 45,000,000, and the accounts written
off as uncollectible during 2013 totaled P 20,000,000. What is the bad debt expense for 2019?

43. Totoy Gold Company assigned P 10,000,000 of accounts receivable as collateral for a P 2,000,000 45% loan
with a bank. The entity also paid a finance fee of 15% on the transaction upfront. What amount should be
recorded as a gain or loss on the transfer of accounts receivable?

44. Valix Company is a dealer in books. On December 31, 2020, the entity sold a book in exchange for a
noninterest bearing note required five annual payments of P 990. The first payment was made on December
31, 2021. The market interest for similar notes was 8%. The PV of 1 at 8% for 5 periods is .68, and the PV of
an ordinary annuity of 1 at 8% for 5 periods is 3.99.

On December 2020, what is the carrying amount of the note receivable?

45. On June 30, 2023, Tom Ford Company sold goods for P 2,000,000 and accepted the customer’s 30% one-
year note in exchange. The 30% interest rate approximates the market rate of return. What amount should be
reported as interest income for the year ended December 31, 2023?

46. Ben Company received from a customer a one-year, P 500,000 note bearing annual interest 8%. After holding
the note for six months, the entity discounted the note without recourse 10%. If the net proceeds is P 513,000,
what is the loss on note receivable discounting?

47. Luffy Company had the following information for 2014 relating to accounts receivable:

Accounts receivable on January 1 1,000,000

Credit Sales 6,000,000
Collections from a pirate, excluding recovery 3,500,000
Accounts written off 100,000
Estimated uncollectible accounts @ 12/31 per aging 1,500,000

On December 31, 2014, what is the balance of accounts receivable, after allowance for doubtful accounts?
48. On January 1, 2015, the statement of financial position of San Miguel Company showed accounts receivable
of P 10 and allowance for doubtful accounts 452. During the current year, the transactions were:

Recoveries on accounts receivable written off as uncollectible in prior periods (not included in cash amount
stated above) 567,123
Accounts receivable written off as worthless 215,540
Cash received from cash customers 222,333
Sales (cash and credit) 1,000,001
Cash refunds given to cash customers for sales returns and allowances 500,000

What is the balance of accounts receivable on December 31, 2015?

49. HTC Company prepared an aging of accounts receivable on December 31, 2016 and determined that the net
realizable value of the accounts receivable was P 543,098. Additional information is as follows:

Accounts written off as uncollectible 449

Accounts receivable on December 31 235,325
Uncollectible accounts recovery 1,393
Allowance for doubtful accounts on January 1 280

For the year ended December 31, 2016, what amount should be recognized as doubtful accounts expense?

50. A Colossal Titan Company’s allowance for doubtful accounts was P 2,000,052 at the end of 2017 and
P2,500,002 at the end of 2016. For the year ended December 31, 2017, the entity reported doubtful accounts
expense of P 902 in the income statement. What amount was debited to the appropriate account in 2013 to
write off uncollectible accounts?