Receivables Quiz

RECEIVABLES
Problem A: During the current year, an entity reported beginning allowance for doubtful accounts
P200,000, sales P9,500,000, sales returns and allowances P1,000,000, sales discounts P500,000, accounts
written off P300,000 and recovery of accounts written off P50,000. It is estimated that 5% of net sales
may prove uncollectible.
Required:
1. What amount should be reported as doubtful accounts expense?

2. What is the ending allowance for doubtful accounts expense?
Problem B: On December 31, 2019, an entity reported accounts receivable of P6,000,000 and allowance
for doubtful accounts of P1,000,000 on January 1, 2019.
Net Credit Sales Writeoffs Recoveries

2016 9,000,000 400,000 30,000
2017 13,000,000 600,000 70,000
2018 15,000,000 700,000 120,000
2019 20,000,000 650,000 150,000
Doubtful accounts are provided as a percentage of net credit sales. The percentage is computed annually
by using the data of the three years prior to the current year.
Required:
3. What amount should be reported as doubtful accounts expense for 2019?

4. What is the allowance for doubtful accounts on December 31, 2019?
Problem C: An entity provided the following information for 2019:
Accounts receivable, January 1 2,000,000

Credit Sales 10,000,000
Collection from customers, excluding recovery of accounts written off 8,000,000
Accounts written off as worthless 100,000
Sales returns 500,000
Recovery of accounts written off 50,000
Estimated future sales returns on December 31 150,000
Estimated uncollectible accounts on December 31 per aging 300,000
Required:
5. What is the amortized cost of accounts receivable on December 31, 2019?

Problem D: On January 1, 2019 an entity sold equipment with carrying amount of P2,000,000 in exchange
for a noninterest bearing note of P5,000,000 requiring ten annual payments of P500,000. The first
payment was made on December 31, 2019. The market interest for similar note is 12%. The present value
of 1 at 12% is 0.32. The present value of an ordinary annuity of 1 is 5.65 for ten periods and 5.33 for nine
periods. (Use PV factors rounded off to two decimal places)
Required:
6. What is the carrying amount of the note receivable on January 1, 2019?

7. What amount should be recognized as gain on sale of equipment in 2019?
8. What amount should be recognized as interest receivable for 2019?
9. What is the carrying amount of the note receivable on December 31, 2019?
Problem E: Solid Bank loaned P7,500,000 to a borrower on January 1, 2019. The terms of the loan were
payment in full on January 1, 2024 plus annual interest payment at 12%.
The interest payment was made as scheduled on January 1, 2020. However, due to a financial setbacks,
the borrower was unable to make the 2021 interest payment.
The bank considered the loan impaired and projected the cash flows from the loan on December 31, 2021.
The bank had accrued the interest on December 31, 2020 but did not continue to accrue interest for 2021
due to the impairment of the loan.
Amount projected
Date of Cash Flow December 31, 2021
December 31, 2022 500,000
December 31, 2023 1,000,000
December 31, 2024 2,000,000
December 31, 2025 4,000,000
Present value of 1 at 12%

For one period 0.89
For two periods 0.80
For three periods 0.71
For four periods 0.64
*Use PV factors rounded off to two decimal places.
Required:
10. What is the present value of the cash flows from the loan receivable on December 31, 2021?
11. What amount should be recognized as impairment loss for 2021?
12. What amount should be reported by the bank as interest income for 2022?
13. What is the carrying amount of the loan receivable on December 31, 2022?
Problem F: On December 1, 2019, an entity assigned on a non-notification basis accounts receivable of
P5,000,000 to a bank in consideration for a loan of 80% of the accounts less a 5% service fee on the
accounts assigned. The entity signed a note for the bank loan.
On December 31, 2019, the entity collected assigned accounts of P2,000,000 less discount of P200,000.
The entity remitted the collections to the bank in partial payments for the loan.
The bank applied first the collection to the interest and the balance to the principal. The agreed interest
is 1% per month on the loan balance.
The entity accepted sales returns of P100,000 on the assigned accounts and wrote off assigned accounts
of P300,000.
Required:
14. What is the balance of accounts receivable assigned on December 31, 2019?
15. What is the carrying amount of the note payable on December 31, 2019?
16. What is the equity of the assignor in the assigned accounts on December 31, 2019?
Problem G: On April 1, 2019, an entity discounted with recourse a 9-month, 10% note dated January 1,
2019 with face of P6,000,000. The bank discount rate is 12%. The discounting transaction is accounted for
as a conditional sale with recognition of contingent liability.
On October 1, 2019, the maker dishonored the noted receivable. The entity paid the bank the maturity
value of the note plus protest fee of P50,000.
On December 31, 2019, the entity collected the dishonored note in full plus 12% annual interest on the
total amount due.
Required:
17. What amount was received from the note receivable discounting?
18. What amount should be recognized as loss on note receivable discounting?
19. What is the total amount collected from the customer on December 31, 2019?
20. If the discounting is secured borrowing, the interest expense to record the transaction is?

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RECEIVABLES

1. What amount should be reported as doubtful accounts expense?

Net Credit Sales Writeoffs Recoveries

3. What amount should be reported as doubtful accounts expense for 2019?

Problem C: An entity provided the following information for 2019:

Accounts receivable, January 1 2,000,000

5. What is the amortized cost of accounts receivable on December 31, 2019?

6. What is the carrying amount of the note receivable on January 1, 2019?

Present value of 1 at 12%

*Use PV factors rounded off to two decimal places.

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