PROBLEM 1

Shown below is JOLLIBEE COMPANY’S aging schedule of its accounts receivable on December 31, 2016.

Balance Days Past Due

Customers Due Current 1-30 31-60 Over 60

ALO Co. P23,000 P0 P0 P23,000 P0

BILLADAREZ, Inc. 105,000 62,000 20,000 13,000 10,000

CORONEL Corp. 87,500 23,000 14,500 10,000 40,000

DAVID, Inc. 93,500 53,000 20,500 10,000 10,000

EGUISABAL Transport 40,000 0 0 0 40,000

FAGULAYAN, Inc 31,000 15,000 16,000 0

GORRAS Co. 1,000 1,000 0 0 0

HURTAL Corp. 64,000 20,000 18,000 16,000 10,000

ILAG Company 60,000 60,000 0 0 0

Totals P505,000 P234,000 P89,000 P72,000 P110,000

The accounts receivable balance per general ledger is P505,000 on December 31, 2016.

The following are audit comments for possible adjustments:

ALO Co.
Merchandise found defective; returned by the customer on November 10 for credit, but the credit memo was
issued by JOLLIBEE only on January 2, 2017.

BILLADAREZ, Inc.
Account is good but usually pays late.

CORONEL Corp.
Merchandise worth P40,000 destroyed in transit on June 4, 2016. The carrier was billed on July 1. (See EGUISABAL
Transport and ILAG Company)

DAVID, Inc.
Customer billed twice in error for P10,000. Balance is collectible.

EGUISABAL Transport
Collected in full on January 15, 2017
FAGULAYAN, Inc.
Paid in full on December 29, 2016 but not recorded. Collections were deposited January 3, 2017.

GORRAS Co.
Received account confirmation from customer for P11,000. Investigation revealed an erroneous credit for P10,000.
(See HURTAL Corp.)

HURTAL Corp.
Neglected to post P10,000 credit to customer’s account.

ILAG Company
Customer wants to know the reason for receipt of P40,000 credit memo as its accounts payable balance is
P100,000.

Based on the foregoing information, what should be the adjusted balance of the accounts receivable –trade at
December 31, 2016?
Accounts receivable per general ledger
P505,000
AA Co. – Delayed issuance of credit memo
(23,000)
CC Corp. – Damaged merchandise credited to II Company
(40,000)
DD, Inc. – Double billing
(10,000)
FF, Inc. – Collection not recorded
(31,000)
GG Co. – Erroneous posting of credit for HH Corp.
10,000
HH Corp. – Payment credited in error to GG Co.
(10,000)
II Company – Credit for CC Corp. erroneously posted to II Company
40,000
Adjusted balance of accounts receivable-trade
P441,000

PROBLEM 2
Sales Cut-off Test

NADINE AUTO PARTS sells new parts to auto dealers. Company policy requires that a pre-numbered shipping
document be issued for each sale. At the time of pickup or shipment, the shipping clerk writes the date on the
shipping document. The last shipment made in the year ended December 31, 2016, was recorded on document
3167. Shipments are billed in the order that the billing clerk receives the shipping documents.

For late December 2016 and early January 2017, shipping documents are billed on sales invoices as follows:

Shipping Sales
Document No. Invoice No.
3163 5332
3164 5326
 3165 5327
3166 5330
3167 5331
3168 5328
3169 5329
3170 5333
3171 5335
3172 5334

The December 2016 and January 2017 sales journals have the following information included:

SALES JOURNAL – DECEMBER 2016

Day of Month Sales Invoice No. Amount of Sale

30 5326 P72,611
30 5329 191,430
31 5327 41,983
31 5328 62,022
31 5330 4,774

SALES JOURNAL – JANUARY 2017

Day of Month Sales Invoice No. Amount of Sale

1 5332 P264,131
1 5331 10,639
1 5333 85,206
2 5335 125,050
2 5334 64,658

1. What is the net overstatement (understatement) of NADINE’s sales for the year ended December 31, 2016?
D – (21,318)
2. What adjusting entry is to correct NADINE’s financial statements for the year ended December 31, 2016?
A – Accounts receivable 21,318
Sales 21,318

PROBLEM 3
You are examining the financial statements of 2GO Shipping Corporation for the year ended
December 31, 2016. Your analysis of the 2016 entries in the Notes Receivable account follows:

Analysis of Notes Receivable

For the Year Ended December 31, 2016

Date Trade Notes Receivable

Debit Credit
1/1 Bal. forwarded 118,000
2/29 Received 25,000 6% note due
 10/29/16 from D whose trade account
was past due
2/29 Discounted D note at 6% 24,960
3/29 Received noninterest bearing demand note from H,
The corporation’s treasurer for a loan 6,200
8/30 Received principal and interest due from A
and in accordance with agreement, two principal
payments in advance 34,200
9/4 Paid protest feel on note dishonored by C 5
11/1 Received check dated 2/1/17 in settlement of
B note. The check was included in cash on hand
12/31/16 8,120
11/4 Paid protest fee and maturity value of D note to bank.
Note discounted 2/29/16 was dishonored 26,031
12/27 Accepted furniture and fixtures with a fair market
value of P24,000 in full settlement from D 24,000
12/31 Received check dated 1/3/17 from H in payment of
3/29/16 note. The check was included in petty cash
until 1/2/17 when it was returned to H in exchange for a new
demand note of the same amount. 6,200
12/31 Received principal and interest on C note 42,437
12/31 Accrued interest on A note 1,200

The following information is available:

a. Balances at 1/1/2016 were a debit of 1,400 in the accrued interest receivable account and a
credit of 400 in the unearned interest income account. The 118,000 debit balance in the
notes receivable account consisted of the following three notes:

A note of 8/31/2012 payable in annual instalments of P10,000

principal plus accrued interest at 6% each August 31
70,000
B note discounted to the corporation at 6% on 11/1/2015 due 11/1/2016 8,000
C note for 40,000 + 6% interest dated 12/31/2015 due on 9/1/2016 40,000

b. No entries were made during 2016 to the accrued interest receivable or unearned interest
income account and only one entry for a credit of P1,200 on 12/31 appeared in the interest
income account

c. All notes were from trade customers unless otherwise indicated

d. Debits and credits offsetting notes receivable debit and credit entries were correctly
recorded unless the facts indicate otherwise.

Prepare a worksheet to adjust each entry to correct or properly reclassify it, if necessary. Enter
your adjustments in the proper columns to correspond with the date of each entry. Do not
combine related entries for different dates. Your completed work sheet will provide the basis for
one compound journal entry to correct all entries to Notes Receivable and related accounts for
2016. Formal journal entries are not required. Use the suggested format:
 Adjustments
NOTES RECEIVAB L E OTHER ACCNT
Per Ledger Adjustments As Adjusted Name of
Date Particulars Dr Cr Dr Cr Dr Cr Account Dr Cr