FINANCIAL ACCOUNTING REVIEW Accounts Receivable

Problem 1 (3-8)

On January 1, 2016, Pau Company sold a piece of
land with a carrying amount of Php12,000,000 in
exchange for a 5% promissory note with face
amount of Php15,000,000. The note is payable in
annual installment of Php5,000,000 plus accrued
interest on the outstanding balance. The first
installment is due on December 31, 2016. There is
no established cash price for the land and the note
has no ready market. The prevailing interest rate for
a note of this type is 10%.

Required:

a. Prepare an amortization table (2016 to 2018)

b. Prepare all entries to record the transactions from January 1, 2016 to December 31, 2018

The note is interest-bearing, but the rate of interest of the note (5%) is unreasonably lower than the prevailing rate (10%) for similar obligation.
The present value of the note is determined as follows:
5 M + (5% x 15 M) = 5,750,000 x 0.9091 P5,227,325
5 M + (5% x 10 M) = 5,500,000 x 0.8264 4,545,200
5 M + (5% x 5 M) = 5,250,000 x 0.7513 3,944,325
Total P13,716,850

Problem 2 (3-6)

On January 1, 2016, Mari Company sold a tract of land that was acquired several years ago for Php5,600,000. Mari
Company received a three-year, non-interest bearing note for Php12,000,000 in exchange for land . There is no
readily available market value for the land but the current market rate of interest for comparable notes is 15%.
The note is payable in equal annual installments of Php4,000,000 every December 31, starting December 31, 2016.
Present value of 1 for three periods at 15% is 0.6575. Present value of an ordinary annuity of 1 for three periods at
15% is 2.2832.

Required:
a. What is the amount of interest revenue recognized in Mari Company’s income statement from 2016 to
2018?
b. What is the carrying amount of the note at December 31, 2016 and 2017?
c. What amounts of the note shall be classified as current assets and non-current assets at December 31,
2016 and 2017?

FV Php 12,000,000
PV (4,000,000 x 2.2832) 9,132,800
---------------------------
Discount on Notes receivable 2,867,200
===============

Notes Receivable 12,000,000

Land 5,600,000
Gain on sale of land (9,132,800-5,600,000) 3,532,800
Discount on Notes Receivable 2,867,200

Effective Interest Principal Carrying Value

1/12016 9,132,800
2016 9,132,800x15%=1,369,920 4,000,000 6,502,720
2017 6,502,720x15%= 975,408 4,000,000 3,478,128
2018 3,478,128x15%= 521,719
521,872 -

Problem 3 (3-4): Camil Company completed the following transactions during the year 2016:

Jan 14 Wrote off the account of Mayet Company for Php20,000 that arose from sale in
July 2015.

July 31 Received a Php24,000, 90-day 10% note from Pau Company for merchandise
sold.

Aug 15 Received a Php40,000 cash plus Php30,000 note from Bulacan Company for merchandise sold.
The note is dated August 15 and bears interest at 12%, and matures in 120 days.
Nov 1 Completed a Php40,000 credit card sale with a 4% fee. Cash is received
Immediately from the credit card company.

Nov 4 Pau Company refuses to pay the note that was due to Camil Company.

Nov 5 Completed a Php18,000 credit card sale with a 5% fee. The amount due from the
credit card company was received on November 9.

Nov 15 Received the full amount of Php20,000 from Mayet Company that was previously
written off on January 14.

Dec 13 Received payment of principal plus interest from Bulacan Company for the
August 15 note.

Required: Prepare journal entries to record the transactions on Camil Company’s books.

July 14 Allowance for Doubtful Accounts 20,000

Accounts Receivable-Moret Co. 20,000
31 Notes Receivable 24,000
Sales 24,000
Aug. 15 Cash 40,000
Notes Receivable 30,000
Sales 70,000
Nov. 1 Cash 38,400
Credit Card Service Charge 1,600
Sales 40,000
4% x 40,000 = 1,600
Nov. 4 Accounts Receivable-Pau Company 24,600
Notes Receivable 24,000
Interest Revenue 600
24,000 x .10 x 90/360 = 600
5 Accounts Receivable-Credit Card 18,000
Sales 18,000
Nov. 9 Cash 17,100
Credit Card Service Charge 900
Accounts Receivable-Credit Card 18,000
5% x 18,000 = 900
Nov. 15 Accounts Receivable-Moret Co. 20,000
Allowance for Doubtful Accounts 20,000
Nov.15 Cash 20,000
Accounts Receivable-Moret Co. 20,000
Dec. 13 Cash 31,200
Notes Receivable 30,000
Interest Revenue 1,200
30,000 x 12% x 120/360 = 1,200

Problem 4 (3-10)

The statement of financial position of Honda Inc. shows the Accounts Receivable balance at December 31, 2016 as
follows:

Accounts receivable Php 900,000

Allowance for doubtful accounts 18,000

During 2017, transactions relating to the accounts were as follows:

1. Sales on account, Php9,600,000.
2. Cash received from collection of current receivable totaled Php7,840,000 after discounts of Php160,000
were allowed for prompt payment.
3. Credit memo issued to customers for sales returns , Pho120,000.
4. Customers’ accounts of Php40,000 were ascertained worthless and written off.
5. Recovered Php10,000 of accounts written off prior to 2017.
6. Received a 90-day, 12% note for Php50,000 from a customer on an overdue account.
7. Accounts receivable of Php1,400,000 have been pledged to a bank on a loan of Php800,000. Collections of
Php300,000 were made on these receivables (not included in the collections previously given) and applied
as partial payment to the loan.
8. Based on assessment of the impairment of receivables, it is estimated that allowance for doubtful accounts
should be Php118,000 at December 31.
9. Recorded the accrued interest on the note in no. 6. The note was dated December 1, 2017.

Required:
Prepare journal entries to record the foregoing transactions. After preparing the journal entries , determine the
amortized cost of the accounts receivable at December 31, 2017.

a. Accounts receivable 9,600,000

Sales 9,600,000

b. Cash 7,840,000
Sales discounts 160,000
Accounts receivable 8,000,000
c. Sales returns 120,000
Accounts receivable 120,000
d. Allowance for uncollectible accounts 40,000
Accounts receivable 40,000
e. Accounts receivable 10,000
Allowance for uncollectible accounts 10,000
Cash 10,000
Accounts receivable 10,000
f. Notes receivable 50,000
Accounts receivable 50,000
g. Cash 800,000
Notes payable-bank 800,000
Cash 300,000
Accounts receivable 300,000
Notes payable-bank 300,000
Cash 300,000
h. Uncollectible accounts expense 130,000
Allowance for uncollectible accounts 130,000
18,000 – 40,000 + 10,000 = 12,000 debit
118,000 + 12,000 = 130,000
i. Interest receivable 500
Interest revenue 500
50,000 x 12% x 30/360
Accounts receivable
(900,000+9,600,000–8,000,000–120,000 - 40,000–50,000–300,000) P1,990,000
Less Allowance for uncollectible accounts 118,000
Amortized cost of accounts receivable P1,872,000

Problem 5 (3-14)

Pau Company has an Allowance for doubtful accounts balance of Php68,000 at January 1, 2017. During 2017,
accounts totaling Php94,000 were written off. Accounts written off in prior years amounting to Php14,000 were
recovered during the year. At December 31, 2017, an aging of its accounts receivable showed:
Amount Probability of Collections
Not yet due Php 340,000 100%
1-30 days past due 240,000 95%
31-60 days past due 20,000 75%
61-90 days past due 30,000 50%
Over 90 days past due 24,000 10%
Additional accounts to be written off 6,000
Required:

Show computations for the following:

a. Doubtful accounts expense for the year 2017.
b. Allowance for doubtful accounts as of December 31, 2017.
c. Amortized Cost of Accounts Receivable at December 31, 2017.

(a) Allowance for Uncollectible Accounts, January 1, 2017 P 68,000

Accounts written off (94,000)
Recovery of accounts previously written off 14,000
Additional accounts written off (6,000)
Allowance for Uncollectible Accounts, December 31, 2017
before adjustments (debit balance) (P18,000)
Required balance in Allowance account based on aging
(5% x 240,000) + (25% x 20,000) + (50% x 30,000)
+ (90% x 24,000) 53,600
Required adjustment/Uncollectible Accounts Expense for 2017 P71,600

(b) Accounts Receivable, December 31, 2017 P654,000

Less Allowance for Uncollectible Accounts 71,600
Net amortized cost P582,400
Problem 6 (3-13)

The balances of selected accounts taken from the December 31, 2016 statement of financial position of Pau
Company are as follows:

Accounts receivable Php 674,000

Allowance for doubtful accounts 24,000

The following transactions affecting accounts receivable occurred during the year ending December 31, 2017 (in
summary):

Sales (all on account, terms: 2/10, 1/15, n/60) Php 3,000,000

Cash received from customers 3,200,000
From customers paying within the 10-day
discount period 1,764,000
From customers paying within the 15-day
discount period 990,000
From recovery of accounts written off 6,000
From customers paying beyond the discount period ?
Accounts receivable written off as worthless 22,000
Credit memorandum for sales returns 12,000

Based on assessment of the collectability of the accounts, impairment loss recognized on accounts receivable is
Php30,000.

Required:

Compute Accounts Receivable and Allowance for Doubtful Accounts at December 31, 2017.

Accounts Receivable, December 31, 2016 P 674,000

Sales on account during 2017 3,000,000
Cash received from customers (3,200,000)
Cash discounts allowed: (1,764,000 ÷ 98%) x 2% ] P36,000
(990,000 ÷ 99%) x 1% 10,000 (46,000)
Recovery of accounts written off 6,000
Accounts written off as worthless (22,000)
Credit memoranda for sales returns (12,000)
Accounts Receivable, December 31, 2014 P 400,000

Allowance for Uncollectible Accounts, December 31, 2016 P 24,000

Recovery of accounts written off 6,000
Accounts written off as worthless (22,000)
Impairment loss on receivables 30,000
Allowance for Uncollectible Accounts, December 31, 2017 P 38,000

The computation may also be conveniently done through T-accounts, as follows:

Accounts Receivable
Balance, beg 674,000 Collections 3,200,000
Sales on account 3,000,000 Cash discounts 46,000
Recovery 6,000 Write off 22,000
Sales returns 12,000
Total 3,680,000 Total 3,280,000
Balance, end 400,000

Allowance for Uncollectible Accounts

Write off 22,000 Balance, beg 24,000
Recovery 6,000
Impairment 30,000
Total 22,000 Total 60,000
Balance, end 38,000

Problem 7 (3-15)

The financial statements of Mari Company reported the following selected accounts.

Accounts receivable, January 1, 2017 Php 2,400,000

Allowance for doubtful accounts, Jan. 1, 2017 120,000
Sales during 2017 20,000,000
Cash collected from customers 17,440,000
The cash collected from customers included a Php40,000 recovery from a customer whose account was written off
in prior year. On November 15, a customer settled his overdue by issuing a 15%, 4-month note for Php800,000.
During 2017, accounts of Php200,000 were written off as worthless.

Analysis of the accounts receivable at December 31, 2017 revealed that Php1,200,000 were considered pas due.
Management’s estimate of probable loss on past due accounts is 20% and on current account at 5%.

Required:

1. Adjusted balance of Allowance for Doubtful Accounts at December 31, 2017.

2. Doubtful Accounts expense for year 2017.
3. Net Realizable Value of Accounts Receivable, December 31, 2017.

a) Accounts Receivable, January 1 P 2,400,000

Sales during 2017 20,000,000
Cash collected from customers (17,440,000)
Recovery of accounts previously written off 40,000
Note received in settlement of an account ( 800,000)
Accounts written off as worthless ( 200,000)
Accounts Receivable, December 31 P 4,000,000
Accounts Receivable, December 31 P 4,000,000
Past due accounts 1,200,000
Current accounts/Not yet past due P 2,800,000
Adjusted balance of Allowance for Uncollectible Accounts
20% x1,200,000 past due accounts P 240,000
5% x 2,800,000 current accounts 140,000
Total P 380,000
(b) Adjusted Allowance for Uncollectible Accounts, Dec. 31, 2017 P380,000
Accounts written off during the year as worthless 200,000
Recovery of accounts previously written off (40,000)
Allowance for Uncollectible Accounts, January 1, 2014 (120,000)
Uncollectible Accounts Expense for year 2014 P420,000
(c) Accounts Receivable P4,000,000
Less Allowance for Uncollectible Accounts 380,000
Amortized cost of accounts receivable, December 31, 2014 P3,620,000

Problem 8 (3-20) Mari Company completed the following selected transactions during 2017:

May 1 Assigned accounts of Php4,000,000 to Kapamilya Bank under a notification

basis. Kapamilya Bank made an advance of 75% and deducted a 6% finance
charge based on the amount advanced.

May 31 Received notice from Kapamilya Bank that Php2,000,000 assigned accounts
had been collected, and that Kapamilya Bank charged Mari Company 12% interest. The collection
is applied first to interest, and the balance is applied to principal.
June 30 Received notice from Kapamilya Bank that Php1,600,000 had been collected.
Kapamilya Bank remitted to Mari Company the amount due to the latter, after deducting 12%
interest on the loan balance.
Required:
Prepare journal entries in the books of Mari Company to record the foregoing transactions.
May 1 Accounts Receivable Assigned 4,000,000
Accounts Receivable 4,000,000
1 Cash (4,000,000 x 75% x 94%) 2,820,000
Finance Charges (3,000,000 x 6%) 180,000
Notes Payable (4,000,000 x 75%) 3,000,000
31 Interest Expense (3.0M x 0.12 x 1/12) 30,000
Notes Payable 1,970,000
Accounts Receivable Assigned 2,000,000
June 30 Notes Payable 1,030,000
Interest Expense (1,030,000 x 0.12 x 1/12) 10,300
Cash 559,700
Accounts Receivable Assigned 1,600,000
Problem 9 (3-19)
Camil Company had the following transactions during 2017:
October 1 Camil Company assigned Php10,000,000 of accounts receivable to a
bank in consideration of a loan. The bank advanced 80% of the assigned accounts
receivable less service charge of 5% based on the amount of the loan. Customers were
not notified of the assignment, thus, Camil Company continues to make the collection.
21 Camil company issued a credit memo to a customer, whose account is
assigned with the bank, for defective merchandise returned amounting to Pho400,000.
31 Assigned accounts of Php5,000,000 were collected, less 2% discount.
November 1 Remitted Php5,000,000 to the bank plus interest for one month at a rate
of 12% per year.
15 Assigned accounts amounting to Php100,000 were found to be worthless and were
written off.
30 Collections of Php4,000,000 were made from the assigned accounts.
December 1 Paid the balance due to the bank, plus 12% interest. The balance in the
assigned accounts, if any, is reverted to unassigned accounts after the final settlement
with the bank.
Required: Journal entries to record the foregoing transactions.
Oct 1 Accounts Receivable Assigned 10,000,000
Accounts Receivable 10,000,000
1 Cash 7,600,000
Finance Charges 400,000
Notes Payable – Bank 8,000,000
5% x 8,000,000 = 400,000
21 Sales Returns and Allowances 400,000
Accounts Receivable Assigned 400,000

31 Cash 4,900,000
Sales Discounts 100,000
Accounts Receivable Assigned 5,000,000
2% x5,000,000 = 100,000

Nov. 1 Notes Payable – Bank 5,000,000

Interest Expense (8M x 0.12 x 1/12) 80,000
Cash 5,080,000
15 Allowance for Uncollectible Accounts 100,000
Accounts Receivable Assigned 100,000
31 Cash 4,000,000
Accounts Receivable Assigned 4,000,000
Sept. 1 Notes Payable – Bank 3,000,000
Interest Expense (3,000,000 x 0.12 x /12) 30,000
 Cash 3,030,000
1 Accounts Receivable 500,000
Accounts Receivable Assigned 500,000

Problem 10 (3-16)
Kapuso Bank has a Php20,000,000 loan to Camil Realty, which was invested by the latter in real estate
development. Due to the economic downtrend in the real estate business, Camil Realty is experiencing declining
sales and is likely to default on its obligation to Kapuso Bank. Camil Realty requests for a restructuring of its loan
with Kapuso Bank. Prevailing market rate of interest for similar obligations at the time of restructuring is 8%.
Accrued interest receivable on the loan at December 31, 2016 is Php2,000,000, based on stated interest rate of
10%.
For each of the following alternative restructuring arrangements, determine the amount of the impairment loss to
be recognized by Kapuso Bank , and give the entry in the books of the company to record impairment. (Round off
present value factors to four decimal places)

Alternative 1
) Reduction of principal to Php18,000,000
) Condonation of accrued interest
) Extension of maturity date to December 31, 2018
) Reduction of interest rate to 8%, payable annually on December 31.
Carrying value (20 M + 2M) 22,000,000
Present value of future cash inflows:
Principal due on 12/31/16 (18M x 0.8264) P14,875,200
Interest for 2 years
18M x 8% = 1,440,000; 1,440,000 x 1.7355 2,499,120 17,374,320
Impairment loss P 4,625,680 Entry:
Restructured Notes Receivable 17,374,320
Impairment Loss – Receivables 4,625,680
Notes Receivable 20,000,000
Interest Receivable 2,000,000

Alternative 2
) Condonation of accrued interest
) Principal amount of Php4,000,000 plus interest on the unpaid principal reduced to 8%,
payable in annual instalments to begin December 31, 2017.
Carrying value (20 M + 2M) 22,000,000
Present value of future cash inflows:
4M + (8% x 20M) = 5,600,000 x 0.9091 5,090,960
4M + (8% x 16M) = 5,280,000 x 0.8264 4,363,392
4M + (8% x 12M) = 4,960,000 x 0.7513 3,726,448
4M + (8% x 8M) = 4,640,000 x 0.6830 3,169,120
4M + (8% x 4M) = 4,320,000 x 0.6209 2,682,288 19,032,208
Impairment loss 2,967,792
Entry: Restructured Notes Receivable 19,032,208
Impairment Loss – Receivables 2,967,792
Notes Receivable 20,000,000
Interest Receivable 2,000,000
Alternative 3
) Payment of the accrued interest on the date of restructuring (December 31, 2016)
) Extension of maturity date of the loan to December 31, 2018, with interest during
extended term at 7% payable on December 31, 2017 and 2018.
Carrying value 20,000,000
Present value of future cash inflows:
Principal due on 12/31/16
20M x 0.8264 16,528,000
Interest due on 12/31/15 and 12/31/16
20M x 7% = 1,400,000; 1,400,000 x 1.7355 2,429,700 18,957,700
Impairment loss 1,042,300
Entry: Restructured Notes Receivable 18,957,700
Impairment Loss – Receivables 1,042,300
Notes Receivable 20,000,000
Cash 1,400,000
Interest Receivable 1,400,000

Alternative 4
) Extension of maturity date to December 31, 2018
) Interest at 10% on the carrying value of the loan (Php22,000,000) payable December 31,
2017 and December 31, 2018.
Carrying value 22,000,000
Present value of future cash inflows:
Principal due on 12/31/16
22M x 0.8264 18,180,800
Interest due on 12/31/15 and 12/31/16
22M x 10% = 2,200,000;
22,000,000 x 1.7355 3,818,100 21,998,900
--------------
No Impairment loss 1,100
==========

due to rounding off, but it hould be zero)

No entry is required for the restructuring.

The present condition of Camil Realty indicates that it has the ability to meet the modified terms as indicated.

Problem 11 (3-23)
Pau Company received from a SMC Corporation a one-year, P1,000,000 note bearing annual interest of 8%. Five
months prior to maturity , Pau Company discounted the note at Kapuso Bank at 10%.
Required:
1. What were the proceeds from the note discounting?
2. Give the entry for the discounting , assuming the note was discounted without
recourse.
3. Give the entry for the discounting, assuming the note was discounted with
recourse.
(a) Maturity value = 1,000,000 + (1,000,000 x .08) = 1,080,000
Proceeds = 1,080,000 – (1,080,000 x 0.10 x 5/12) = 1,035,000
(b) Interest Receivable 46,667
Interest Revenue 46,667
1,000,000 x 8% x 7/12

Cash 1,035,000
Loss on Sale of Notes Receivable 11,667
Notes Receivable 1,000,000
Interest Receivable 46,667
Problem 12 (3-26)
Mari Company finances some of its current operations by factoring its accounts receivable to Kapuso Finance
Company. On July 1, 2016, the company factored Php4,000,000 of its accounts receivable to Kapuso Finance
Company. Purchase price was 85% of the receivables factored. Kapuso Finance Company withheld 5% of the
purchase price as protection against sales returns and allowances.
Sales returns recorded by Mari Company on the factored accounts receivable totalled Php60,000; the balance of the
factor’s holdback was settled by Kapuso Finance Company on August 31, 2016.

Required:
1. What was the net cash received by Mari Company from this factored accounts?
2. Give the entries in the books of Mari Company to record the foregoing in the
Months of July and August 2016.

Accounts receivable factored P4,000,000

Purchase price 85%
Purchase price of accounts receivable factored P 3,400,000
Less amount withheld (5% x3,400,000) 170,000
Net cash received from the factored accounts P 3,230,000

(b)
Cash 3,230,000
Receivable from Factor 170,000
Loss on Factoring 600,000
Accounts Receivable 4,000,000
Sales Returns 60,000
Receivable from Factor 60,000
Cash 110,000
Receivable from Factor 110,000
(170,000-60,000 = 110,000)

Problem 13 (3-27)
Pau Company manufactures and sells beauty products to retailers. During 2016, the company completed the
following transactions related to receivables:
a. Sold goods, Php6,000,000 on account, all under the terms: 2/15,n/60. The company uses the gross
method to record accounts receivable.
b. Total cash collected from customers on account was Php4,500,000. Customers who paid
Php1,764,000 paid their accounts within the discount period.
c. Notes received in settlement of account were Php500,000.
d. Collected Php400,000 of notes receivable plus interest of Php32,000 (which includes the Php5,600
interest receivable at December 31, 2015).
e. Notes receivable discounted with recourse were Php80,000. Proceeds from the discounting were
Php82,800. The total maturity value of the notes is Php92,000. All of theses notes matured without
notice of protest.
f. Accounts receivable assigned were Php600,000 on a loan for Php480,000. Service fees of Php36,000
were charged by the finance company on the assignment.
g. Notes receivable of Php30,000 were overdue as of December 31, on which Php1,800 interest has
accrued.
h. Accounts of Php24,000 were written off during 2016.
 i. As of December 31, Php360,000 of the assigned accounts had already been collected, this amount plus
appropriate interest of Php6,000 had been remitted to the finance company.
j. As of December 31, an assessment of collectability of the receivables indicated that the allowance for
uncollectible accounts must be adjusted to a balance of Php60,000.
k. Of the remaining notes not yet due, Php6,400 interest had accrued at December 31.
The following were the balances as of December 31, 2015:
Notes receivable Php 200,000
Interest receivable 5,600
Accounts receivable 1,200,000
Allowance fro uncollectible accounts 24,000

Required:
1. Prepare entries relating to the foregoing including year-end adjustments and any reversing
entries at January 1.
1/1/12 Interest Revenue 5,600
Interest Receivable 5,600
(1) Accounts Receivable 6,000,000
Sales 6,000,000
(2) Cash 4,500,000
Sales Discounts (1,764,000/98%) x 2% 36,000
Accounts receivable 4,500,000

(3) Notes Receivable 500,000

Accounts Receivable 500,000
(4) Cash 432,000
Notes Receivable 400,000
Interest Revenue 32,000
(5) Cash 82,800
Liability on Discounted Notes 82,800
Liability on Discounted Notes 82,800
Interest expense 9,200
Notes Receivable 80,000
Interest revenue 12,000
(6) Accounts Receivable Assigned 400,000
Accounts Receivable 400,000
Cash 444,000
Finance Charges 36,000
Notes Payable 480,000
(7) Accounts Receivable 31,800
Notes Receivable 30,000
Interest Revenue 1,800
(8) Allowance for Uncollectible Accounts 24,000
Accounts Receivable 24,000
(9) Notes Payable 360,000
Interest Expense 6,000
Cash 366,000
(10) Uncollectible Accounts Expense 60,000
Allowance for Uncollectible Accounts 60,000
60,000 – (24,000 –24,000 )
(11) Interest Receivable 6,400
Interest Revenue 6,400
(b) Trade and Other Receivables include the following:
Notes Receivable P 190,000
Accounts Receivable – Unassigned ?
Accounts Receivable - Assigned ?
Interest Receivable
Allowance for Uncollectible Accounts (60,000)
Total P
Problem 14 (MC19)
The following data are given for Toyota, Inc.:
Cash Credit Total
Cost of sales Php 100,000 Php 900,000 Php 1,000,000
Cash received from
customers 130,000 1,170,000 1,300,000
Assuming merchandise was marked to sell as follows: Cash sales, at 30% above cost and credit sales, at 40% above
cost, all of which are collectible. The balance of accounts receivable at the end of the period was _____________.
Php90,000
900,000 x 1.4 = 1,260,000; 1,260,000 – 1,170,000 = 90,000

Problem 15 (MC 22)

Camil Company had the following information relating to its accounts receivable:
Accounts receivable at 12/31/15 Php 2,600,000
Credit sales for 2016 10,800,000
Collection from customers during 2016 (including
recovery of Php50,000) 9,500,000
Accounts written off 9/30/16 250,000
Collection of accounts written off in prior years 50,000
Estimated uncollectible receivables per aging
at 12/31/16 330,000

At December 31, 2016, Camil’s accounts receivable before allowance for uncollectible accounts, should be
____________. Php3,700,000
2,600,000 + 10,800,000 + 50,000 – 9,500,000 – 250,000 = 3,700,000

Problem 16 (MC27)
Camil Company prepared an aging of its accounts receivables at December 2016 and determined that the
amortized cost of the receivables was Php500,000. Additional information is available as follows:
Allowance for bad debts, 1/1/16-credit balance Php 56,000
Accounts written off as uncollectible during 2016 46,000
Accounts receivable at 12/31/16 540,000
Uncollectible accounts recovery during 2016 10,000
What is Camil’s uncollectible account expense for the year 2016? Php20,000
540,000 – 500,000 = 40,000; 40,000 + 46,000 – 56,000 – 10,000 = 20,000
Problem 17 (MC25&26)
The following accounts were abstracted from Pau Company’s unadjusted trial balance at December 31, 2016:
Debit Credit
Accounts receivable Php 2,000,000
Allowance for uncollectible
accounts 16,000
Net credit sales Php 6,000,000
Pau Company estimates that 3% of the gross accounts receivable outstanding will become uncollectible.
1. After adjustments at December 31, 2016, what is the balance of the allowance for uncollectible accounts?
Php60,000
3% x 2,000,000 = 60,000

2. How much uncollectible accounts expense is reported in Pau Company’s statement of comprehensive
income for year ended December 31, 2016? Php76,000
60,000 + 16,000 = 76,000

Problem 18 (MC 23)

You are given the following information relating to Mari Trading, a general merchandising company:
Rate of gross profit on sales 20%
Accounts receivable, December 31, 2015 Php 160,000
Collections on accounts receivable in 2016 860,000

Cost of goods available for sale in 2016 Php 920,000

Collections on accounts receivable in 2016 860,000
Merchandise inventory, December 31, 2016 200,000
Assuming all sales were on account, what was the company’s accounts receivable balance on December 31, 2016?

Problem 19 (MC24)
Accounts receivable for Mari Company at December 31, 2016 showed a balance of Php3,00,000. The allowance for
uncollectible accounts had a Php90,000 debit balance before the year end adjustment. Sales during the year totaled
Php25,000,000. An aging analysis shows that Php150,000 of the outstanding accounts receivable are estimated to
be uncollectible. The uncollectible account expense for 2016 is ____________. Php240,000

Problem 20 (MC28)
Camil Company recorded uncollectible accounts expense of Pho40,000 during 2016. The allowance for uncollectible
accounts had a balance of Php35,000 on December 31, 2015. During the year 2016, Camil Company wrote of
Php61,000 of uncollectible receivables and recovered Php16,100 of uncollectible accounts written off in prior years.
How much will be the allowance for uncollectible accounts at December 31, 2016? Php30,100
Problem 21 (MC29&30)
Alexis Company has the following data relating to accounts receivable for the year ended December 31, 2016:
Accounts receivable, January 1, 2016 Php 960,000
Allowance for uncollectible accounts, Jan 1, 2016 38,400
Sales during the year, all on account, terms: 2/10,1/15,n/30 4,800,000
Cash received from customers during the year 5,120,000
Accounts written off during the year 35,200
An analysis of cash received from customers during the year revealed that Php2,822,400 was received from
customers availing the 10-day discount period, Php1,584,000 from customers availing the 15-day discount period,
Php9,600 represented recovery of accounts written off, and the balance was received from customers paying
beyond the discount period.
Alexis Company’s year-end balance of allowance for uncollectible accounts was estimated to be 5% of the
outstanding accounts receivable as at December 31, 2016, based on the aging of the accounts.
1. What is the accounts receivable balance at December 31, 2106? Php540,800
2. How much was Alexis Company’s doubtful account expense for the year ended December 31, 2016?
Php14,240

Problem 22 (MC32)
During 2016, Camil Company wrote off uncollectible accounts of Php15,000 and recovered
accounts of Php7,400 that had been written off in 2015. In addition the following information is available:
Accounts Receivable Amortized Cost
December 31, 2014 Php 750,000 Php 725,000
December 31, 2015 1,000,000 960,000
The uncollectible account expense for the year 2016 is __________. Php22,600

Problem 23 (MC31)
On June 30, 2016, Alexis Company had an unadjusted credit balance of Php20,000 in its allowance for uncollectible
accounts. An analysis of Alexis Company’s trade accounts receivable at that date revealed the following:
Age Amount % of Collectibility
0-30 days Php 1,200,000 95%
31-60 days 80,000 90%
Over 60 days 40,000 Php28,000
What amount should Alexis Company report as allowance for uncollectible accounts in its June 30, 2016 statement
of financial position? Php96,000

Problem 24 (MC33)
On December 31, 2014, Pau Company sold equipment to Camil Company for Php200,000. Pau Company accepted a
10% note receivable for the entire sales price. This note is payable in two equal installments of Php100,000 plus
accrued interest on December 31, 2015 and December 31, 2016. On July 1, 2016, Pau Company discounted the note
at a bank at a discount rate of 12%.

Pau Company’s proceeds from the discounted note were _________. Php103,400
Problem 25 (MC36)
On December 31, 2016, Angel Finance Company gave Camil Company a Php4,000,000, 12% loan. Camil Company
received proceeds of Php3,880,000, after deduction of non-refundable finance and other processing charges of
Php120,000. Principal and interest are due in 60 monthly installments of Php89,000 beginning January 1, 2017. The
repayment yields an effective interest rate of 13.4% based on the proceeds of Php3,880,000. Angel Finance
Company has the intention of collecting the contractual cash flows from this loan over the full term of the loan,
thus, does not elect to measure this at fair value.
1. What amount of interest revenue should Angel Finance Company recognize for the year 2016 as a result of
this loan ? Php43,326
2. How much interest receivable should Angel Finance Company record on December 31, 2017? Php40,000

Problem 26 (MC38&39)
Camil Company sold a tract of land with carrying amount of Php6,000,000 to Lacoste Company on July 1, 2016,
Php2,400,000 was collected on the date of sale and the balance of Php5,600,000 is collectible in four equal annual
installments of Php1,805,000, consisting of principal and 11% interest on the unpaid balance, The first annual
installments is due on July 1, 2017.
1. What amount related to the notes receivable shall be classified as current assets on December 31, 2017?
Php1,189,000
2. How much is interest income for the year ended December 31, 2017? Php550,606

Problem 27 (MC 34&35)

On January 1, 2017, Angel Corporation sold equipment costing Php760,000 with accumulated depreciation of
Php320,000 on the date of sale. Angel received as consideration for the sale, a Php800,000 non interest bearing
note, due January 1, 2020. There was no established exchange price for the equipment and the note had no ready
market. The prevailing rate of interest for a note of this type at January 1, 2017 was 10%. The present value of 1 at
10% for three periods is 0.75.
1. In Angel’s 2017 statement of comprehensive income, how much should be reported as interest income?
Php60,000
2. What is the carrying amount of the note at Angel’s December 31, 2017 statement of financial position?
Php660,000

Problem 28 (MC40)
Mummy Company received from a customer a one year, Php1,000,000 note bearing annual interest of 8%. After
holding the for four months, Mummy company discounted the note , with recourse, at Kapuso Bank at a discount
rate of 10%.
At the date of discounting, Mummy Company would receive cash of ________. Php1,008,000.

Problem 29 (MC41)
Camila Company found itself in financial difficulties and decided to use its accounts receivable as a means of
obtaining cash to continue operations. On July 1, 2017, Camila factored Php1,500,000 of accounts receivable for
cash proceeds of Php1,390,000. No allowance for uncollectible was associated with these accounts.
On December 17, 2017, Camila assigned the remainder of its accounts receivable , Php5,000,000 as of that date, as
collateral on a Php2,500,000, 12% annual interest rate loan from Kapatid Bank. Camila received Php2,500,000 less
2% finance charge.
Additional information is as follows:
Allowance for doubtful accounts expense, 12/31/2017 (before adjustment) Php64,000
Estimated uncollectible, 12/31/2017 – 3% of Accounts receivable
Accounts receivable (not including factored and assigned accounts), December 31, 2017-Php1,000,000
Of the assigned accounts, Php600,000 had been collected by the end of the year.
1. How much were the proceeds from factoring and general assignment of the accounts receivable?
Php3,840,000
2. Assuming that these are the only transactions affecting receivables, how much is the uncollectible account
expense for the year ended December 31, 2017? Php98,000

Problem 30 (MC43)
Mari Company, One of Pau Company credit customers, is experiencing financial difficulties and a downward trend in
its financial performance. The firm is unable to service its obligation and as a result has missed the payment of its
note and accrued interest with Pau Company. The principal amount of the note is Php1,000,000 (which is already
due) with annual interest of 10% payable annually. Accrued interest balance at December 31, 2017 is Php100,000.
Mari Company management has negotiated a modification of its debt terms with Pau Company. At this time, the
prevailing market rate of interest for similar transaction remained at 10%.
Pau Company agreed to the following new terms:
 Forgive the accrued interest at December 31, 2017
 Extend the payment of the principal for two years
 Reduce the interest rate (payable annually) to 8%
How much impairment loss should be recognized by Pau Company on December 31, 2017? Php134,760

Problem 31 (MC44&45)
On December 31, 2017, the Kapamilya Finance Company had a Php10,000,000 notes receivable from Grand Towers
Company. The note bears 10% interest. The books reported accrued interest of Php1,000,000 on this date. Because
of financial distress being suffered by Grand Towers Company, Kapamilya Finance agreed to the restructuring and
modification of the terms of its loan to Grand Towers as follows:
 Reduction of principal to Php8,000,000
 Reduction of interest to 8% payable annually beginning December 31, 2018
 Accrued interest on December 31, 2017 is condoned; and
 Principal payment was reset to December 31, 2019
The prevailing market rate of interest for similar obligations on the date of restructuring decreased to 9%. Use
present value factors rounded to two decimal places.
1. How much impairment loss should Kapamilya Finance Company record on December 31, 2017 as a result
of the restructuring? Php3,246,400
2. At what amount would the restructured notes receivable be reported at December 31, 2017?
Pho7,753,600