CHAPTER 4

PROBLEM 4-1
a. Trade accounts receivable ₱775,000
Trade notes receivable 100,000
Installments receivable 300,000
Advance payments to suppliers 150,000
Advance payment to subsidiary 400,000
Claims Receivable 15,000
Subscription Receivable 300,000
Accrued Interest Receivable 10,000
Customer's credit balance ₱ 30,000
Advance payments from customers 20,000
Receivables 2,000,000

b. Trade accounts receivable ₱775,000

Allowance for doubtful accounts -50,000
Trade notes receivable 100,000
Installments receivable 300,000
Advance payments to suppliers 150,000
Claims Receivable 15,000
Subscription Receivable 300,000
Accrued Interest Receivable 10,000
Trade and other receivables ₱1,600,000

c. Customers' credit balances and advances from customers is classified as current liabilities and
is part of Trade and other Payables.

Advances to subsidiary is classified as non-current asset and a long-term investment.

PROBLEM 4-2
a. Account Receivable, Jan. 1 ₱600,000
Charge Sales 6,000,000
Total ₱6,600,000
Less:
Collection from customers ₱5,300,000
Write off 35,000
Merchandise Returns 40,000
Allowances to Customer 25,000 5,400,000
Accounts Receivable, Dec. 31 ₱1,200,000

b. Subscription Receivable ₱150,000

Special deposit on contract 120,000
Claims Receivable 60,000
IOUs from employees 10,000
Advances to affiliates 100,000
Advances to suppliers 50,000
Accounts Receivable ₱490,000
 c. Accounts Receivable, Dec. 31 ₱1,200,000

Claims Receivable 60,000

IOUs from employees 10,000
Advances to suppliers 50,000
Trade and Other Receivables ₱1,320,000

d. Subscription Receivable should be deducted to subscribed share capital.

Special deposit on contract is classified as Non-current asset.
Advances to affiliates is also classified as Non-current investments.

PROBLEM 4-3
1. FOB destination and freight collect
To record the sale:
Accounts Receivable ₱500,000
Freight out 10,000
Sales ₱500,000
Allowance for freight charge 10,000

To record the collection within the discount period:

Cash ₱475,000
Sales Discount 15,000
Allowance for freight charge 10,000
Accounts Receivable ₱500,000

2. FOB destination and freight prepaid

To record the sale:
Accounts Receivable ₱500,000
Freight out 10,000
Sales ₱500,000
Cash 10,000

To record the collection within the discount period:

Cash ₱485,000
Sales Discount 15,000
Accounts
₱500,000
Receivable

3. FOB shipping point and freight collect

To record the sale:
Accounts Receivable ₱500,000
Sales ₱500,000

To record the collection within the discount period:

Cash ₱485,000
Sales Discount 15,000
Accounts Receivable ₱500,000

4. FOB shipping point and freight prepaid

 To record the sale:
Accounts Receivable ₱510,000
Sales ₱500,000
Cash 10,000

To record the collection within the discount period:

Cash ₱495,000
Sales Discount 15,000
Accounts Receivable ₱510,000

PROBLEM 4-4
1. Sales of merchandise on account, 2/10, n/30
Accounts Receivable ₱4,000,000
Sales ₱4,000,000

2. Collection within the discount period

Cash ₱1,470,000
Sales discount 30,000
Accounts Receivable ₱1,500,000

3. Collection beyond the discount period

Cash ₱1,000,000
Accounts Receivable ₱1,000,000

4. Sales return granted

Sales returns ₱100,000
Accounts Receivable ₱100,000

5. Sales return estimated at the year end

Sales returns ₱20,000
Accounts Receivable ₱20,000

PROBLEM 4-5
1. To record the sale
Accounts Receivable ₱4,500,000
Sales ₱4,500,000

2. Collection within the discount period

Cash ₱4,410,000
Sales Discount 90,000
Accounts Receivable ₱4,500,000

3. Collection beyond the discount period

Cash ₱4,500,000
Accounts Receivable ₱4,500,000
PROBLEM 4-6
1. To record the sale
Accounts Receivable ₱2,450,000
Sales ₱2,450,000

2. Collection within the discount period

Cash ₱2,450,000
Accounts Receivable ₱2,450,000

3. Collection beyond the discount period

Cash ₱2,500,000
Accounts Receivable ₱2,450,000
Sales Discount forfeited 50,000

PROBLEM 4-7
To record sales
Accounts receivable ₱4,000,000
Sales ₱4,000,000

Sales returns granted

Sales returns ₱300,000
Accounts Receivable ₱300,000

Estimated sales returns

Sales returns ₱100,000
Accounts Receivable ₱100,000

Sales ₱4,000,000
Industry statistics 10%
Total ₱400,000
Less: Sales returns granted 300,000
Total ₱100,000

PROBLEM 4-8
Trade accounts receivable ₱2,000,000
Allowance for doubtful accounts -100,000
Claims receivable 300,000
Trade and Other Receivables - current ₱2,200,000

PROBLEM 4-9
Accounts Receivable, ₱1,300,
Jan. 1 000
5,500,0
Credit Sales
00
₱6,800,
Total
000
Less:
₱150,0
Sales Return
00
100,00
Written off
0
 Collection from 5,000,0 5,250,00
customers 00 0
Accounts Receivable, ₱1,550,
Dec. 31 000
Less:
₱50,00
Estimated sales returns
0
Estimated uncollectible 250,00
300,000
accounts 0
₱1,250,
Net Realizable Value
000

PROBLEM 4-10
Accounts Receivable, Jan. 1 ₱1,300,000
Credit Sales 5,400,000
Total ₱6,700,000
Less:
Collection from customers ₱4,750,000
Written off 125,000 4,875,000
Accounts Receivable, Dec. 31 ₱1,825,000

PROBLEM 4-11

₱3,50
Trade accounts receivable
0,000
Trade installements receivable due
1-18 months
(850,000 - 800,0
50,000) 00
Trade accounts receivable from 150,0
officers, dure recently 00
Trade accounts on which postdated
20
check are held and no entries were
0,000
made on receipt of checks

₱4,65
Trade accounts receivable
0,000

PROBLEM 4-12
Accounts Receivable, Jan. 1 ₱4,000,000
Credit Sales 10,600,000
Accounts Receivabl collected -8,400,000
Accounts Receivable, Dec. 31 ₱6,200,000

Inventory, January 1 ₱4,800,000

Purchases 8,000,000
Inventory, December 31 -4,400,000
Cost of Sales ₱8,400,000
Gross Margin on sales 4,200,000
Gross Sales during the year ₱12,600,000
Cash Sales -2,000,000
Credit Sales ₱10,600,000
PROBLEM 4-13
Merchandise purchases ₱7,000,000
Merchandise Inventory, Dec. 31 -1,400,000
Cost of Goods Sold ₱5,600,000
Markup on Cost (5,600,000 x 40%) 2,240,000
Sales (5,600,000 x 140%) ₱7,840,000
Collection from customers -4,000,000
Accounts Receivable, Dec. 31 ₱3,840,000

PROBLEM 4-14
List Price ₱5,000,000
Less: (5,000,000 x 20%) 1,000,000
Total ₱4,000,000
Less: (4,000,000 x 10%) 400,000
Total ₱3,600,000
Less: (3,600,000 x 5%) 180,000
Gross Final Value ₱3,420,000

Gross Final Value ₱3,420,000

Less: Sales return 500,000
Total ₱2,920,000
Less: (2,920,000 x 4%) 116,800
Total ₱2,803,200
Less: Freight Charge 100,000
Net Realizable Value ₱2,703,200

PROBLEM 4-15
1. List Price ₱5,000,000
Less: (5,000,000 x 30%) 1,500,000
Total ₱3,500,000
Less: (3,500,000 x 20%) 700,000
Gross Final Value ₱2,800,000

2. Gross Final Value ₱2,800,000

Less: (2,800,000 x 2%) 56,000
Total ₱2,744,000
Add: Delivery Cost 200,000
Amount received by Pitt from Burr ₱2,944,000

PROBLEM 4-16
Merchandise Purchases ₱9,000,000
Less: Ending Inventory 1,500,000
1. Cost of Goods Sold ₱7,500,000
Mark up on Cost (7,500,000 x 40%) 3,000,000
Sales (7,500,000 x 140%) ₱10,500,000
Less: Cash Sales (10,500,000 x 20%) 2,100,000
2. Sales on account ₱8,400,000
Less:
 Collection from customers ₱6,000,000
Written off 50,000 6,050,000
₱2,350,000
Less:
5% of credit sales ₱420,000
Written off -50,000 370,000
3. Net Realizable Value ₱1,980,000
PROBLEM 4-17
1
Accounts Receivable, Jan. 1 ₱560,000
.
Charge Sales 5,250,000
Total ₱5,810,000
Less:
Collections from customers
(5,200,000 - 50,000) ₱5,150,000
Write off 35,000
Merchandise returns 25,000
Allowances to customers 15,000 5,225,000
Total ₱585,000
Add: Accounts written off but recovered 10,000
Accounts Receivable, Dec. 31 ₱595,000

2. Accounts Receivable, Dec. 31 ₱595,000

Claims Receivable (400,000 - 50,000) 350,000
Advances to suppliers 300,000
Trade and Other Receivables ₱1,245,000

3. Shareholders' subscription (1,000,000 - 200,000) ₱800,000

Special deposit contract - current 500,000
Other Receivable - Non current ₱1,300,000

PROBLEM 4-18
1. Accounts Receivable, Jan. 1 ₱950,000
Credit Sales (5,900,000 - 2,100,000) 3,800,000
Total ₱4,750,000
Less:
Cash received from credit customers ₱3,024,000
Write off 50,000
Sales Returns and Allowancces 250,000
Sales Discount 126,000 3,450,000
Accounts Receivable, Dec. 31 ₱1,300,000

2. Allowance for doubtful accounts, Jan. 1 ₱100,000

Recoveries on accounts receivables written off 80,000
Doubtful accounts 70,000
Less: Accounts written off -50,000
Allowance for doubtful accounts, Dec. 31 ₱200,000
PROBLEM 4-19
1. D
2. D
3. A
4. C
5. A
6. C
7. D
8. C
9. A
10. C

PROBELM 4-20
1. A
2. A
3. A
4. D
5. B