1

2ndFl
r,GFPar
tner
sBl
dg,
139H.
V.del
aCost
a,Sal
cedoVi
l
lage,
Makat
iCi
ty

AUDI
TINGPROBLEMS
Audi
tofRecei
vabl
es Pr
of. L.
O.
Ar
ist
orenas
_
_ _
___
___

GAAPONRECEI
VABLES
DEFINI
TION:
Recei
vabl
esrefertoclai
msagainstot
hersformoney
,goodsorser vicesari
singfr
om
sal
eofmer chandi
seormoneyl entort
heperf
ormanceofser
vices. Foraccounti
ngpurposes
however,t
hetermisemployedtomeanclai
msexpectedt
obesettl
edbythereceipt
sofcash.

RECOGNITI
ON:
Recei
vabl
esarer
ecogni
zedwhenti
tl
etothegoodspassest
othebuyerorwhentr
ansfer
ofr
esour
cestakepl
ace. Thepoi
ntatwhi
chti
tl
epassesmayvarywi
tht
hetermsofthesales.

MEASUREMENT:
1. Atfacevalue
2. Atdiscountedamount(
presentv
alue)

VALUATI
ON:
1. Receivablearev al
uedatthei
rnetreali
zabl
eval
ueorthei
rexpected cashv alue.
Determinati
onofNRVr equiresest
imat
ionofuncoll
ect
ibl
er ecei
vabl
es, as
such,anal lowanceaccountshouldbesetupf ordoubtf
ulaccountsandf orany
anti
cipatedadj ustment
swhichint henormalcour
seoft hebusinesswillr
educe
theamountr eceiv
able.

Netr
eal
izabl
eval
ue- isthe estimated amountofcash t hatwil
lbe
col
lectedorreal
izedfrom r
eceivables.
2. Long t erm not e r ecei
vabl
es shoul d be v al
ued at an amount
repr
esenti
ngthepresentval
ueoftheexpectedfuturecashreceipts.
3. Receiv
able denominat
ed inforeign cur
rency should be translat
ed t
olocal
curr
encyattheexchangerat
eonbal ancesheetdate.

CLASSI
FICATION:
1. CurrentAssetsv s.NonCur rent
Current - r ecei vableswhi char eexpectedt ober eali
zedcashwi t
hint he
normal oper atingcy cl
eoroney ear
,whi chev erislonger.
Noncur rent -r eceivabl eswhi char eexpectedtober eal
izedbey ondoney earor
thoser ecei vableswhi char enotcurrentlycol l
ecti
ble.
2. Tradev s.Non-tr
ade
Tradereceivable -r eferst ocl aimsar i
singfr
om cr editsaleofmer chandise
orser vi
cesi nt heor dinarycourseoft he busi ness. Theusual
typeoft r
ader ecei v
abl esare:
a. Account sr eceiv able - shor tterm, unsecur edandi nfor
mal
cr editar rangement s(openaccount s).
b. Not esr ecei vable - ev idencedbyaf ormal instrumentwhi ch
ist hepr omi ssor ynote.
Nontrader eceivables - r epresentclaimsar isingf rom sour ces ot her
thant hesal eofmer chandiseorser vi
cesi nt heor dinar
ycour seof
thebusi ness.
 2

BALANCESHEETPRESENTATI ON:
Recei
vabl
es whet
hertrade ornon t
rade whi
ch ar
e cur
rent
lycol
lect
ibl
e shoul
d be
pr
esent
edonthebal
ancesheetasoneli
nei
tem cal
ledTr
adeandOtherr
ecei
vabl
es.

AUDI
TOBJECTI VES:
1. Exist
ence - todetermi newhet herr ecei
vablesact uall
yexist.
AuditProcedur e: Obt ai
n a schedul eofagedt radeaccount sr ecei
vabl
e
and not esr eceivableschedul es and r econcilet hem t ot hegener al
l
edger .
2. RightsandObl i
gat i
ons - todet ermi newhet herreceivablesrepresentbona
fi
deobl igati
onsowedt ot hecompanyasofbal ancesheetdat e.
AuditProcedur es:
a. Confirmr eceivabl eswi thdebtors
b. Inspectnot esonhand
c. Perform anal ytical r ev i
ewprocedur es
3. Compl eteness- todetermi net hatal l
t r
ansacti
onsr elativ
et o
receivableshav ebeenr ecorded i nthepr operaccount i
ngper iod.
AuditProcedur e: Testcut offofsalesandsal esr et
urnst odet ermi
ne
whet herreceivablesar er ecor dedinthepr operaccount i
ngper iod.
4. Valuati
on - todetermi newhet herr ecei
vablesarer ecordedatpr operamount s
i
naccor dancewi thGAAP.
AuditProcedur e: Rev iew col l
ect
ibil
ityofr eceivablesanddet ermi
ne
theadequacyofal l
owancef ordoubt fulaccount s.
5. Presentati
onandDi scl
osur e- todet ermi newhet herreceivablesarepr oper l
y
presentedandcl assifiedi nt hebalancesheet .
AuditProcedur e: Ev aluate f i
nancial st at
ement pr esentat i
on and
discl
osur eofrecei vables.

OTHERITEMS:
1. MethodsofRecei
vableConfirmat ion
a. Posi
tiv
econfirmation
- usedwheni ndividualaccountbalancesar er el
ati
velylarge.
- thereisar easont obelievethattheremaybeasubst antialnumber
ofaccount sindi sputeorwi t
hinaccuraciesori rr
egulari
ties.
- i
nternalsubst antiati
ngev i
dencesar enotadequat e
- i
nternalcont r
ol system isweak
b. Negati
veconfir
mat ion
- i
nternalcont r
ol proceduresregardingreceivables ar e
consideredef fectiv
e.
- alargenumberofsmal lbal
ancesar einvolved
- theaudi torhasnor easont obel i
evet hatper sonsr eceivingthe
requestsar eunlikelytogivethem consideration.

2. Tr
adediscount
sv s.Cashdiscount
s
Tradediscounts- thi
salsoknownasv olumediscountorquanti
tydiscount
.I t
i
sameansofadj usti
ngtheli
stpr i
cef ordif
fer
entbuy ersorvar
yingquantit
ies.
Accountsrecei
vablesshoul
dber ecor
dednetoft radediscount
s.
Cashdiscounts - t
hisisar educti
onfrom theinvoi
cepricebyreason
orpromptpay ment.

3. Customer ’
screditbalances - credi
tbal
ancesinAccountsreceivabl
esresul
ti
ngf r
om
overpayments,retur
nsandal lowancesandadvancepayment
sf rom customer. Thisaccount
shouldbeclassifi
edascur rentli
abil
it
iesandmustnotbeoffsetagainstthedebi
tbalancesin
othercust
omer s’account.

3. Ter
msr
elat
edtof r
eightchar
ges
a. FOBDest i
nati
on - means t
hat owner
shi
p to the merchandi
se is
tr
ansfer
red
t
o the buyer onl
y upon r
eachi
ng the point of
 3

desti
nati
on
oruponthebuy er’
sr ecei
ptofmer chandise.
b. FOBShippingpoint - meanst hatowner shiptothemer chandiseistransf
err
ed
tothebuyeruponshi pmentt hereof.
c. Frei
ghtcoll
ect- meansthatthefr
eightchar gesont hemer chandise
shi
ppedistobepai dby t hebuy er.
d. Frei
ghtprepai
d - meanst hatthefreightchargesont hemer chandise
shi
ppedwasal readypai dbyt hesel l
er.

4. Accounti
ngforbaddebtsexpense
a. Al
lowancemethod - t hi
sr equi
restherecogniti
onofbaddebtlossift
he
account saredoubtfulofcol
l
ection.
b. Di
rectwri
teof
fmet hod - thisrequi
restherecognit
ionofbaddebt
l
ossonl ywhent heaccountpr ovedtobeworthl
ess
or
uncoll
ecti
ble.

5. Met hodsofest imat ingbaddebt sexpense

a). Per cent ageofsal es(Incomest atementappr oach)- bad debt s expense i s
calculatedbyappl y i
ngaper centaget ocr edi
tsal esfort heper iod. Thi spr ocessr esult
si nan
adjustingent r
yt hatdebi t
sbaddebt sexpenseandcr editsal lowancef ordoubt f
ulaccount s
withoutr egardt otheexi sti
ngbal ancei nt heal l
owanceaccount . Apr opermat chingofcost
andr ev enuei sachi evedbecausebaddebtl ossi sdirect l
yr el
atedt osalesandr epor tedint he
yearofsal es
b). Per cent ageofRecei vables( Balancesheetappr oach) -r esult
si n amor e
accurat ev aluati
onofr eceiv abl
esont hebal ancesheetsi ncet hi smet hodat t
empt stov alue
account sreceivablesatt heirfut
urecollectibl
eamount s.
a. Composi t
eper centage -a si ngler atei s appl ied to Account s
receivabl eattheendoft heper i
odt oobt ainthedesi r
edendi ngbal anceoft heal l
owance. The
amountofbaddebt sexpensesr ecognizedi sthedi f
ferencebet weent heexistingbal anceint he
all
owanceaccountandt hedesi r
edendi ngbal ance.
b. Agi ng -account sr eceivable are cl assified by age and a di f
ferent
percent agei sappliedt oeachagegr oup. Theal lowancei st hendet erminedbymul ti
ply
ingt he
totalofeachcl assifi
cat i
onbyt her ateorper centofl ossdependi ngont heexper ienceoft he
companyf oreachcat egor y.

6. NOTESRECEI VABLES
a. Defi
nit
ion -
thesear eclaimssupportedbyf or
mal promi sest opay,whichar ei
nthe
f
orm ofnot es.
b. Recognit
ion
1. Shortterm notesaregener al
lyrecor
dedatf acev aluebecauset heinterest
impli
citinthemat urityval
ueisimmat eri
al.
2. Longter m notesshoul dberecordedatpresentv alue.
a. I
nterestbearingnotes- thePVoft henot eisthesameast hef ace
amountoft henot e.
b. Noni nt
erestbear i
ngnotes
PresentVal ue
noteexchangedsol elyforcash equal tot heamountofcashpr oceeds
noteexchangedf orproperty,goods Pr esentv al
uei saccordi
ngt othe
ff.orderofpr i
orit
y:
1. FMV of t he property,goods or
services
2. FMVoft henot erecei
ved
3. Discounted amountofnot e usi
ng
appropr i
aterateofint
erest.

Thedi f
fer
encebet weenthefaceamountoft henoteandi
tsPVi srecordedas
discountorpremium andamor ti
zedt
oI nter
esti
ncomeaccountoverthelif
eof
thenoteusingtheeffect
ivei
nter
estmethod.

c. Val
uat
ionandr
epor
ti
ng
 4

1. Shor
tterm not
esarer
epor
tedattheirnetreali
zabl
eval
ue.
2. Longter
m notesar
erepor
tedatpresentvalue.

7. ACCOUNTSANDNOTESRECEI VABLEFI
NANCING:
a. Pl
edgi
ng - receivabl
esar
eusedascollat
eralorsecur
it
yforal oanandnot
ref
lect
edintheaccountsalt
houghadiscl
osur
eshoul
dbemadei nthefi
nanci
alst
atement
s
eit
herinanot
eorparent
heti
call
y.

b. Assignment - amor eformalbor rowingar r

angementi nwhi chtherecei
v abl
esar e
usedassecur it
y. Theassi gnororbor rowert ransfer
si tsri
ghtsinsomeofi tsaccount s
recei
vablestoal enderorassigneeinconsiderati
onf oraloan
1. Thel oanisataspeci fi
edper centageoft hef acev al
ueoft hecollater
aland
i
nterestandser vi
cef eesarechargedtotheassignor( borr
ower )
.
2. Thedebt orsareoccasional
lynotifi
edt omakepay ment stotheassi
gnee( l
ender)
butmostassi gnment sarenotonanot i
fi
cati
onbasi s.
3. Assignedaccount saresegr egatedf r
om ot heraccounts. TheNot espay abl
e
shouldbededuct edf rom thebalanceofA/ Rassi gnedtodet erminet heequi
tyinassi gned
accountsreceivable.

c. Factori
ng - itissi mi
l
art oasal eofrecei
vablesbecauseitisgeneral
lyona
withoutr ecour
se-
noti
fi
cat
ionbasis. Thef actororbuyerassumest her
iskofcoll
ecti
vi
tyand
generallyhandlesthebil
l
ingandcol lect
ionfuncti
on. A gai norlossisrecogni
zedforthe
diff
erencebet weenthepr oceedsreceiv
edandt henetcarryi
ngamountoft herecei
vabl
es
factored.

d. Di
scounti
ng - t hisi
sasaleofthenot
etoat hi
rdpart
y,usual
lyabank. Thesalesis
usuall
yonawi t
hr ecoursebasi swhi
chmeansthatuponthedefaul
tofthedebtor
,thesel
lerof
thenotebecomesl i
ablef orit
smaturi
tyval
ue. Proceedsfr
om discount
ingiscomputedas
fol
lows:
1. Int
er esttomat uri
ty (
PxRxT)
2. Mat urit
yv al
ue (
P+I)
3. Discount (
MVxDRxDP)
4. NetPr oceeds (
MV-Discount)

I
fthef
acev
alueoft
henot
eis>pr
oceeds,
thedi
ff
erencei
sint
erestexpense.
I
fthef
acev
alueoft
henot
eis<pr
oceeds,
thedi
ff
erencei
sint
eresti
ncome.

END

Probl
em 1
TheAccountsReceivabl
econtr
olaccountbalanceofJamesCompany.was
P861,
200asofDecember31,2004. Thesubsidiar
yledgeraccount
soft
hecompany
ar
esummarizedbel
ow. Creditt
ermsar
e60day snet.

CUSTOMERDATE DEBI
T CREDI
T BALANCE
__
___
1 May 31 20,
000 20,
000
 5

Jul
y 01 12,
000 8,000
07 20,
000 28,000
Sept 01 12,
000 16,000
25 32,
000 48,000
Nov 01 12,
000 36,000
Dec 10 12,
000 48,000

2 Aug 08 33.
600 33,
600
Oct 04 33,
600-
Nov 25 88,
000 88,
000

3-2month6% Jan 01 480,

000
480,
000
Mar 01 484,
800 (
4,800)
2month6% Dec 01 400,
000
395,
200

4 Feb 03 40,
000 40,
000
Aug 03 40,
000 80,
000

5 Feb 10 120,
000 120,
000
Apr 09 120,
000 -
May 04 160,
000 160,
000
Jul
y 02 160,
000 -
Sept 06 211,
120
211,
120
Nov 25 8,
880
220,
000

6 Jul
y 17 20,
000 20,
000
Aug 16 17,
760 37,
760
Sept 30 30,
000 67,
760
Oct. 15 37,
760 30,
000
18 24,
000 54,
000
Dec 20 24,
000 30,
000

TheAl
lowanceforDoubtf
ulAccount
sbeforeaudi
thasacr editbal
anceofP20,
000.
TheAl
l
owanceforDoubt
ful
Accountsi
stobeadj
ustedt
oabalancedeter
minedasfol
l
ows:

Account
snotdue 1/2of1%
Account
s1-60dayspastdue 2%
Account
s61-120pastdue 5%
Account
sover120dayspastdue 50%

Theprovi
sioni
stobebasedonlyont
het
radeaccount
s. Exceptwher
epay
ment
sar
e
ear
mar
ked,
theol
desti
temsar
epaidfi
rst
.

REQUI
REMENTS:
1. Prepar
easchedul
eforagi
ngofaccount
srecei
vabl
e.
2. Adjust
ingj
our
nalent
ri
es.

Pr
oblem 2
Thefoll
owingtransacti
onsaffecti
ngtheAccount sreceivabl
eaccountofAstori
a
Companyfort
hey earendedDecember31, 2004wer egatheredinthecourseofyouraudit
:
Sal
es(Cashandcr edi
t) P 118,210
Cashreceivedfr
om cashcust omers 41,035
Cashreceivedfr
om creditcustomers(P62,080wasr eceivedfrom
customerswhot ookadv ant
ageoft hediscount,3/10,n/30) 64,160
Accountsrecei
vablewrit
tenoffaswor thl
ess
990
 6

Credi
tmemor andaissuedtocredi
tcustomersforsal
esr et
urns 5,
255
Cashrefundsgiv
ent ocashcustomersforsal
esretur
ns&al lowances 3,
395
Recoveri
esonaccount sr
ecei
vablewrit
tenoffasuncoll
ecti
bleinpri
or
peri
ods(notincl
udedinthecashcoll
ecti
onsstatedabove) 1,
323

Anagi
ngoft her eceivablesindi catethatP3,460oft heaccount
srecei
vabl
ebal ancear
e
deemed uncoll
ecti
ble. Thef oll
owi ng bal anceswer et akenfr
om theDecember31,2003
balancesheet
:
Account sreceivable P 19,170
Al
lowancef ordoubt f
ul account s 1,948
credit
REQUI REMENTS:
Comput
efort hebal ancesoft hef ol
lowingasofDecember31, 2004:
1. Accountsr eceivabl
e
2. All
owancef ordoubtfulaccounts
3. Doubtful account sexpense

Problem 3
Youareengagedt oper
form anaudi toftheaccount soft heSCOTCO.f ortheyearended
December31,2004andhav eobservedt het aki
ngoft hephy sicalinventor
yofthecompanyon
December30,2004. Onl ymerchandi seshi ppedbyt heSCOTCO.t ocust
omersupt oand
i
ncluding December30,2004 hav e been el i
mi nat
ed f r
om i nventory. The invent
ory as
determinedbyphy sicalinv
entor
ycounthasbeenr ecordedont hebooksbyt hecompany '
s
controll
er. Noper petuali
nvent
oryr ecordsar emai ntained. Al lsalesaremadeonanFOB
shippingpointbasis. Youar etoassumet hatallpur chasei nvoiceshavebeencor r
ectl
y
recorded.

Thef ol
l
owingli
stsofsal
esinvoi
cesareent
eredi
nthesal
esbooksf
ort
hemont
hsof
December2004andJanuar
y2005respect
ivel
y:

Sal
esInv
. Sal
esInv
. Costof
Amount Date MdseSold Dat
eShi
pped
Dec2004
a) 150,000 Dec 21 100,000 Dec.31,2004
b) 100,000 Dec 31 40,000 Nov.03,2004
c) 50,000 Dec 29 30,000 Dec.30,2004
d) 200,000 Dec 31 120,
000 Jan.03,
2005
e) 500,000 Dec 30 280,
000
Dec.29,2004
(
shi
pped t
o
consi
gnee)
Jan2004
f) 300,000 Dec 31 200,
000
Dec.30,2004
g) 200,000 Jan 02 115,
000
Jan. 02,2005
h) 400,000 Jan 03 275,
000
Dec.31,2004

REQUIREMENT: Pr epar
e thenecessar
y adjust
ing jour
nal
ent
ri
esatDecember
31,2004 in connecti
on wit
h t he for
egoing dat
a.

Problem 4
Duri
ngDecember2004,t heAccount srecei v
ablecontroll
i
ngaccountont hebooksof
JonesI nc.showedonedebi tposti
ngandtwocr editposti
ngs. Thedebi tr
epresent sr eceiv
able
fr
om Decembersal es,P260,
000. Onecr editwasf orP156,800,madeasar esul tofcash
coll
ectionsonNov emberandDecemberr eceivables;thesecondcr edi
twasanadj ust mentfor
esti
mat eduncollecti
blesofP30,
000. TheDecember31, bal
ancewasP90, 000.
Whenr eceivableswerecol
lect
ed,thebookkeepercr editedAccountsreceiv ablef orthe
cashcol l
ected. All cust
omerswhopaidtheiraccount sduri
ngDecembert ookadv ant ageoft he
2%di scount.
 7

AsofDecember01,debi tbalancei ncustomers'subsidi

aryaccount stotaledP59,
000.
anadjustmentf oresti
mat eddoubtf
ulaccount sofP6,000hadbeenpost edt ot heAccounts
recei
vablecontr
ol l
i
ngaccountattheendof2003, andnowr i
teof f
swer erecordeddur i
ng2004.
Inaddit
ion,anumberofcust omershadov er
paidthei
raccount sandasar esult,someoft he
customers'subsidi
aryaccountshadcreditbal
ancesonDecember01. Noov er
pay mentswere
madedur ingDecembernorwer eanycr editbal
ancesi ncustomer s'accountsreducedduring
December .

Requi
rement
s:Adj
ust
ingj
our
nal
ent
ri
esasofDecember31,
2004

Probl
em 5
You ar eexamini
ng thef i
nancialstat
ementsofJackl emon Inc.forthey earended
December31,2004. Dur i
ngt heaudi tofaccountsreceiv
ableandot herrel
atedaccounts,
cer
taini nformationwasobtai
ned. Fr om t
hisinf
ormati
ony ouaretoprepareaudi
tadjust
ments
and comput ef orthecorr
ectbal ancesoft heAccountsr ecei
vabl
eand t heAl l
owancefor
doubtful accountsasofDecember31, 2004.

TheDecember31,2004debitbalancei
ntheAccountsrecei
vablecontrolaccountisP98,500.
Theonlyentr
iesi
ntheBaddebt sexpenseaccountwere;acreditforP162onDecember01,
2004becauseCompanyAr emittedinful
lfort
heaccountschargedof fonOct ober31,2004
andadebi tonDecember31f ortheamountoft hecredi
tt ot heAllowancef orDoubtful
account
s.
TheAl
l
owancef
ordoubt
ful
account
sschedul
eispr
esent
edbel
ow:

DEBI
T CREDI
T BALANCE
January2004 1,
829
October31,2003,Uncol
l
ect
ible:
CompanyA P 162
CompanyB 410
CompanyC 282 754
December31, 2003,5% ofA/ R 4,
925 6,
000

Anagi
ngschedul
eoftheaccount
srecei
vabl
easofDecember31,
2004andt
hedeci
sion
ar
eshownint
hetabl
ebelow:

AGE AMOUNT %OFUNCOLLECTI BILI

TY
0-
1mont
h 46,620 1%
1-
3mont
hs 38,410 2%
3-
6mont
hs 11,090 3%
ov
er 6mont
hs 3,000 Def
ini
telyuncol
lecti
ble,P500;
P1,
000i sconsi
dered50%uncol l
ect
ibl
e
Bal
ancei s80%collecti
ble

Thereisacr edi
tbal
anceinoneaccountr eceivable(
0-1month)ofP1,000. I
trepr
esents
anadv anceonasal escontract
. Al so,thereisacr edi
tbal
ancei noneoft he1-3mont hs
accountr eceivabl
eofP250forwhi chmerchandisewill beacceptedbythecustomer.
Thel edgeraccount
shav enotbeencl osedasofDecember31,2004. TheAccount s
receivablecont r
olaccountisnoti nagreementwi t
ht hesubsidi
aryledger
. Thedi ff
erence
cannot bel ocatedandtheauditordeci
dest oadjustthecontr
oltothesum ofthesubsi
diari
es
aftercorrecti
onsaremade.

REQUIREMENTS:
1. Wor ki
ngpaperthatwil
lshowtheadjust
mentsandagingoft
heaccount
srecei
vabl
eaccount.
2. Adjusti
ngj
ournalentr
ies
3. Howmuchi sthedoubt f
ulaccount
sexpensetobereport
edi
nthe2004IncomeStatement
?

Problem 6
From i
ncept
ionofoper
ati
onstoDecember31, 2004,
Tr oyCorpor
ati
onprovi
dedforuncoll
ecti
ble
accountsrecei
vabl
eundertheallowancemethod. Pr ovi
sionswer emademont hl
yat2% ofcr edit
sal
es;baddebtswritt
enoffwer
echargedtot
heal l
owanceaccount ;
recover
iesofbaddebtsprevi
ously
 8

writ
tenoffwer ecr edit
edt ot heal l
owanceaccountandnoy earendadj ustment
stot heall
owance
accountweremade. Tr oyCor p.’susualcreditt
ermsar enet30day s.
Thebalancei nt heAllowancef orDoubt f
ulAccountswasP65, 000atJanuary01,2004. Dur
ing
2004creditsalest otaledP4, 500,000,interi
m pr ov
isi
onsf ordoubtfulaccountsweremadeat2% of
credi
tsales,P45,000ofbaddebt swer ewr it
tenoffandr ecover
iesofaccount spr
evi
ouslywri
tt
enoff
amountedofP7, 500. Tr oyCor porati
oninstall
edacomput erf
acil
it
yinNov ember2004andanagingof
accountsrecei
vablewaspr eparedf orthef i
rstti
measofDecember31, 2004.
Asummar yoft heagingi sasfoll
ows:

CLASSI
FICATI
ON AMOUNT %OF
ByMonthofSal
e UNCOLLECTI
BILI
TY

Nov-Dec P570,000 2%
Jul
y-Oct 300,000 10%
Jan-
June 200,000 25%
Pri
ortoJan1,
2004 65,000 75%

Basedont hereview ofcol

lect
ibil
it
yoft heaccountbalancesintheover“
priortoJan1,2004
“categor
y,addi
ti
onalreceivabl
estotal
i
ngP30, 000waswr it
tenoffasofDecember31, 2004. Effect
ive
withtheyearendedDecember31,2004,Tr oyCorp.adoptedanewaccount ingmethodf orest
imating
theall
owancefordoubtfulaccount
satt heamountindicat
edbyt heyearendagi
nganalysisofaccounts
recei
vabl
e.

Requi
rements:
1. Prepar
eandanal y
sisoft
heAl
lowanceaccount
.
2. Adjust
ingjour
nalentr
y
Pr
oblem 7
AssadCo.hast hefoll
owingdatar
elat
ingtoaccountsr
ecei
vabl
efort
hey
earended
December31,2004:

Accountsreceiv
ables,January01, 2004 P 720,000
All
owancef ordoubtfulaccounts,January01,2004 28,800
Sal
esdur i
ngthey ear(allonaccount s,
terms,
2/10,
1/15,
n/60) 3,
600,
000
Cashreceivedfrom customersdur ingtheyear 3,990,
000
Accountswr i
tt
enof fduri
ngthey ear 26,400

Ananal ysi
sofcashr eceiv
edf r
om customersduringthey earrev
ealedthattheP2,116,
800was
receivedfrom customersav ai
li
ngthe10daydi scountper i
od; P1,188,000from customer s
avail
ingthe15daydi scountperi
od;P7,200repr
esentedrecoveryofaccountswri
ttenoffandt he
balancewasr eceivedfrom customerspayingbey ondt
hedi scountperiod. AssadCo. ’
sy ear
endbal anceofAl l
owancef ordoubtfulaccount
swasest imatedtobe5% oft heout standing
accountsrecei
vableasofDecember31, 2004.

REQUI
REMENTS: Comput ef ort
hebalancesoft
hefol
l
owing:
1. Account
sreceivableasofDecember31,
2004
2. Baddebtsexpense
3. Netreal
i
zablevalue

Problem 8
Youar eengagedi nyourfif
thannualexami nati
onofthef i
nanci
alstatementsofLai n
Corporati
on. Yourexaminati
onisfortheyearendedDecember31, 2004. Thecl i
entprepar
ed
the f
ollowing schedul
es ofTrade Notes Recei
vables and I
nter
estReceivables f
ory ou at
December31, 2004. Youhav echeckedtheopeningbalancestoyourpri
oryear’
sauditworki
ng
papers.

Yourex
ami nationrevealsthef
oll
owingi
nformati
on:
Int
er estiscomput edona360daybasis. Incomput
ingtheint
erest,
iti
sthe
Corpor ati
on’spracti
cetoexcl
udethefi
rstdayoft
henote’
sterm andtoi
ncludet
hedue
date.

1. TheMar cos’ Company’

s90daynotewasdi scount
edonMay16at10% andt he
proceedswerecr
edi
tedt
otheTr
adeNotesReceiv
ableaccount
. Thenot
ewaspai
dat
 9

mat uri
t y.
2. AquinoI ndust ri
esbecamebankr uptonAugust31andt heCor porationwi llrecov erP0.75
forev er ypeso. Al lofLainCor poration’sNot eRecei v ablepr ovidef orinterestatt he
l
egal rat eof12%ont hematurityv alueofadi shonor ednot ed.
3. J.Lain,Pr esidentofLai nCor por ationconf i
r medt hatheowedt heCor porati
onP75, 000
andt hatheexpect st opaythenot ewi t
hinsi xmont hs. Youar esat i
sf i
edt hatthenot ei s
coll
ect ible.
4. RoxasCor porati
on’s60 daynot ewasdi scount ed onNov ember01 at8% and t he
proceedswer ecr editedtotheTr adeNot esRecei vabl eandI nt
er estRecei vableaccount s.
On December02,Lai n Cor por ation r ecei ved not ice f r
om t he bank t hatRoxas
Corpor at i
on’snot ewasnotpai datmat urityandt hati thadbeenchar gedagai nstLain’s
checking accountby t he bank. Upon r eceiving t he not ice f rom t he bank,t he
bookkeeperr ecorded the not e and accr ued i nterestt hereon i nt he Tr ade Not ed
Receiv abl eandI nterestReceivabl eaccount s. RoxasCor porationpai dLainCor porati
on
thefull amountduei nJanuary2005.
5. ThePel aezI nc.90daynot ewaspl edgedascol l
ater alforP175, 000, 60day6%l oanf r
om
thePhi lippineNat ionalBankonDecember01.
6. On Nov ember1,t he Corporat i
on r eceived f ourP40, 000 90 daynot esf rom Rect o
Company . OnDecember01,t heCor por ationr ecei vedpay mentf rom Rect oCompany
foroneoft heP40, 000not eswi thaccr uedi nterest . Pr epay mentoft henot esi sall
owed
withoutpenal ty. Thebookkeepercr edited Account sRecei vableaccountf orcash
received.

LainCor
por
ati
on
TRADENOTESRECEI
VABLEANDRELATEDI
NTERSTRECEI
VABLE
Inter
est Bal ance 2004
Maker I
ssueDat e Terms Rate 12.31.03 Debits Cr
edit
s
Balance
Lawt onCo. 04. 01.03 Oney ear 12% P300,000
P300, 000 -
Mar cosCo. 05. 01.04 90day safterdate - 150,000 146,875
3,
125
Aqui no 07.01.04 60day s 12% 30,
000
30,
000
Lai
n 08.03.04 Demand 12% 75,
000
75,
000
RoxasCor p. 10. 02.04 60day safterdate 12% 250,000
250,000 - 250,
000
250,000
PelaezInc, 11. 01.04 90day saf t
erdat e 8% 210,000
175,000 35,000
Rect oCo. 11.01.04 90day safterdate 12% 160,000
160,000
____
_ _
_ _____
__ ___
___
_ ___
____
P300,000 1,
125,000 871,875
553,
125
===== ===== ====== =======

I
NTERESTRECEI
VABLES

BALANCE BALANCE
2.
31.
03 DEBI
T CREDIT
12.
31.04
Lawton Co. P 27,
000 P 9,
000 P 36,
000
AquinoI
nd. 600 P 600
Lai
n 2,
000
2,
000
RoxasCorp 5,
000 3,
300 1,
700
Pel
aezInc. 2,
800
2,
800
RectoCo. 3,
200
3,
200
_
___
____
__ _
___
___
_ __
___
___
_ ___
____
_
P 27,
000 P22,
600 P 39,
300 P
10,
300
======= ======= ======= ======

REQUI
REMENT: Pr
epar
ed t
he adj
ust
ing j
our
nalent
ri
es t
haty
ou woul
d suggestat
 1
0
December31,
2004f
ort
heabov
etr
ansact
ion. Di
sregar
dincomet
axi
mpl
i
cat
ions.

Problem 9
Deter
mi nethecashpr oceedsf rom t hefollowi ngdi scount ednot es(Use360day s)
a. A2mont h11%not ef orP750, 000dat edSept ember01, 2004,discountedonOct ober01,
2004att hebankat12%.
b. Aoney ear ,5% notef orP1, 500,000 di scount edatt hebankat10% af terholdi
ngt he
notefor3mont hs.
c. A60daynoni nterestbear ingnot ef orP500, 000dat edNov ember16,2004di scountedat
thebankonDecember1, 2004at9%.
d. AP1, 000, 000notebear i
ngi nterestof10%dat edJul y01,2003. Thenot ei spayablein
twoinstall
ment sofP100, 000pl usaccr uedi nt erestonDecember31,2003andDecember31,
2004. Thenot ewasdi scount edonJul y01, 2004at12%.
e. OnJune01,2003,Fr atCor p.sol dmer chandi sewi thal istpri
ceofP25, 000t oJerryCo.
onaccount . Fr atall
owedt r
adedi scountsof30%and20%. Cr edi
ttermswer e2/ 15and4/ 30
andthesal ewasmadeFOBshi ppingpoi nt . Fr atpr epaidP200del i
verycostsf orJerryCo.as
anaccommodat ion. OnJune12,2004,how muchdi dFr atreceiv
edasf ullpay mentoft he
accountofJerryCo. ?
f. OnDecember21, t
hef oll
owi ngnot esar edi scount edbyt hebankat15%. Det erminethe
cashproceedsr oundedt ot henear estpesosf rom di scount ingeachnot e.
a. 30day , P4,500noni nt
er estbear i
ngnot edatedDecember15
b. 60day , P3,380, 9%not edat edDecember01.
c. 60day , P15,000, 13%not edat edNov ember16
d. 90day , P6,775, 10%not edat edNov ember24

Probl
em 10
From i ncepti
on ofoper ation 1n 2000,PeterCo.car r
ied no al
lowancef ordoubt ful
account s.Uncol l
ecti
bl ereceivableswer eexpensesaswr itt
enof fandrecov er
ieswer ecredi
ted
toincomeascol lected,OnMar ch01,2004( aft
erthe2003f inanci
alstatementswer eissued),
managementr ecogni zedthatPet er’
saccount i
ngpoli
cywi thr espectt
odoubt fulaccountswas
notcorrectanddet ermi nedt hatanal l
owancef ordoubtfulaccountswasnecessar y . Apol i
cy
wasest ablishedt omai nt
ainalal l
owancef ordoubtf
ulaccount sbasedonPet er’
shistor
icalbad
debtlossper centageappl i
edt oy earendaccount sreceivable. Thehi stori
calbaddebtl oss
percentagei st ober ecomput edeachy earbasedont her elati
onshipofnetwr it
eof f
stocr edit
sal
esf orall avai
lablepasty ear supt oamaxi mum off i
vey ears.

I
nfor
mat
ionf
rom Pet
er’
srecor
dsf
orf
ivey
ear
sisasf
oll
ows:

YEAR CREDI
TSALES ACCTS.WRITTENOFF RECOVERI
ES
2000 P 750,000 P 7,
500 P
0
2001 1,
125,
000 19,
000 1,
350
2002 1,
475,
000 26,
000 1,
250
2003 1,
650,
000 32,
500 2,
400
2004 2,
000,
000 41,
500 2,
500

Account
srecei
vabl
ebalanceswer
eP625,
000andP700,
000atDecember31,
2003and
December31,2004r
especti
vel
y.

REQUIREMENTS:
1. Pr
eparedjournalentryt
osetuptheAllowancef
orDoubtf
ulaccount
sasofJanuar
y01,
2004. Di
sregardincomet ax. Showsuppor
ti
ngcomputat
ions

QUI
ZZER:
1. NEWTOWNCor
por
ati
ondeci
dedt
hatt
heal
l
owancef
orbaddebt
sshoul
dbeadj
ust
ed
 1
1
toequaltheesti
matedamountrequi
redbasedonagi
ngt
heaccount
sasofDecember31.
Thefol
lowingdatawer
egat
hered:
All
owancef orbaddebts,
Jan.01,
2004 P 120,
000
Provisi
onforbaddebtsduri
ng2004
(2%ofP3,000,000sal
es) 60,
000
Baddebt swri
ttenoffi
n2004 75,
000
Esti
mat edbaddebtsperagi
ngofaccount
son
December31, 2004 80,
000

Thebaddebt
sprovisi
onshoul
dbeadjustedby:
DEBI
T CREDI
T____
____
___
__ _
a. Baddebtsexpense 15,000 All
owanceforbaddebt
s 15,
000
b. All
owanceforbaddebt
s 45,000 Accounts recei
vabl
e
22,
500
c All
owanceforbaddebt
s 25,000.
Baddebt
sexpense 25,
000
d. Baddebtsexpense 25,000 All
owanceforbaddebt
s 25,
000

2.BARTCompanystar
tedoper
ati
onsonJanuar
y01,
2004. Thef
oll
owi
ngar
eav
ail
abl
eas
ofJune30,
2004:

Purchaseofmer chandise P 450,000

I
nventory,June30, 2004 75,000
Goodswer esol dat50%abov ecost;75%ofsal
eswereonaccount
Esti
mat edbaddebt s 1%ofcredi
tsales
Coll
ecti
onsf r
om char gecustomers 315,000
All
owancef ordoubt fulaccounts,June30,
2004aft
erwr i
teof
fof
uncollecti
bleaccount s
3,
903.75
Theoutstandingaccount sr ecei
vableasofJune30,2004were:
a. P 110,000
b. P 106,875
c. P 106,560
d. notgiven

3. PALEI nc.sell
st owhol esaler
sont ermsof2/15,net30. PALEI NC.hasnocashsal es
but50% ofi tscust omer stakeadvantageoft hediscount
. PALEI nc.usesthegross
met hodofr ecordingsal esandt raderecei
vable. Ananal ysi
sofPALEI NC.'
strade
receivables bal ancesatDecember31, 2004revealedthef
oll
owi
ng:
AGE AMOUNT UNCOLLECTI BLE
0-15day s P 100,000 none
16-30day s 60,000 5%
31-60day s 5,000 10%
over60day s 2,500 P2,000
P 167,500
==========
InitsDecember31,2004bal ancesheet,whatamountshoul dPALEI nc.repor
tas
all
owancef ordiscounts?
a. P 1,000
b. P 1,620
c. P 1,676
d. P 2,000

It
ems4, 5&6ar ebasedont hefol
lowi
ng
Youareengagedt operfor
m anauditoftheaccountsoftheKOUTSCor p.Fortheyear
endedDecember31,2004,andhav eobservedthet akingofthephy si
cali nvent
oryoft he
companyonDecember27, 2004. Onl
ymerchandiseshippedbytheKOUTSCor p.tocustomers
upt oandincl
udingDecember27,2004hav ebeenremov edorexcludedfrom inventor
y. The
i
nv ent
oryasdeterminedbyphy si
cali
nvent
orycounthasbeenr ecordedont hebooksbyt he
company ’
scontr
oll
er. Noper pet
uali
nvent
oryrecor
dsar emaint
ained. Allsalesaremadeon
anFOBshi ppi
ngpointbasi
s.
 1
2
Thef ol
l
owingli
stsofsal
esinv
oicear
eent
eredi
nthesal
esbooksf
ort
hemont
hsof
December2004andJanuar
y2005.

SALESINVOICES
Date Amount DateShipped
December2004 a. 12.23.
04 P 12,500 12.
31.04
b. 12.27.
04 9,000 12.
27.04
c. 12.30.
04 15,000 01.
05.05
d. 12.22.
04 6,000 01.
18.05
e. 12.28.
04 8,000 12.
29.04
f. 12.03.
04 4,000 12.
05.04
g. 12.31.
04 10,000 01.
07.05
h. 12.31.
04 7,000 12.
31.04
Januar
y2005 i
. 12.31.
04 3,750 12.
29.04
j
. 12.27.
04 5,500 01.
04.05
k. 01.08.
05 4,500 01.
09.05
l
. 01.10.
05 2,500 12.
31.04
4. How much salesforthemont h ofDecember2004 wereer
roneouslyrecorded on
Januar
y2005?
a. P 6,250
b. P 9,250
c. P 3,750
d. P 10,000

5. Howmuchsal
esf
ort
hemont hofJanuar
y2005wer
eer
roneousl
yrecor
dedi
nDecember
2004?
a. P 0
b. P 31,000
c. P 6,500
d. P 10,000

6. Howmuchi
sthecorr
ectamountofsal
esf
ort
hemont
hendedDecember31,
2004?
a. P 71,
500
b. P 46,
750
c. P 40,
500
d. P 77,
750

7. HAREInc.receivedfrom acustomeraoney ear,P500,000note,bear

ingannuali
nter
est
of8%. Af t
erholdingthenot efor6mont hs,HAREInc.discountedthenoteinPhil
tr
ustBank.
TheproceedsofP513, 000wer ecredit
edbyt hebankt oHARE' saccount
. Whatwast he
di
scountrat
echargedbyt hebank?
a. 8%
b. 10%
c. 5%
d. 3%

8. Thef
oll
owingi nf or
mat i
onr elatestoLADYCo. 'saccountsrecei
vabl
efor2004.
Account sreceiv
able, Jan01, 2004 P 650,000
Creditsal esfor2004 2,700,000
Salesr eturnsfor2004 75,
000
Account swr i
tt
enoffdur i
ng2004 40,000
Collectionsf r
om cust omer sduring2004 ( i
ncl
uding
Recov eryofP8, 000wr i
ttenoffinpri
oryears) 2,150,000
Estimat edf ut
uresalesr eturnsatDecember31, 2004 50,
000
Estimat eduncol l
ectibleaccountsatDecember31, 2004 110,000

WhatamountshouldLADYCo.r epor
tforAccountsrecei
vabl
ebef
oreal
l
owancesf
or
sal
esr
etur
nsanduncoll
ect
ibl
eaccountsatDecember31,2004?
a. P 925,
000
b. P 1,085,
000
c. P 1,093,
000
 1
3
d. P 933,
000
9. Inyourexaminati
onoft hebooksandaccountsofPLUM Companyforthey ear2004,you
havenotedthattheentir
epastdueaccount softhecompanyamountingtoP200,000shouldbe
setupasAl lowanceforDoubt fulaccount
s. Ont hesepastdueaccounts,managementwi th
properrecommendat i
onfrom t hecompany’sl
egalcounsel
,hasdeci
dedt owrit
eof faccounts
withbalancet ot
ali
ngP40, 000. AsofDecember31,2004,t hebalanceofAl l
owancef or
Doubtful AccountswasP125, 000.

Theaddi
ti
onal
prov
isi
onrequi
redforthecompany
’sdoubt
ful
account
sis:
a. P 35,000
b. P 75,000
c. P 160,000
d. P 200,000

10. TheAl l
owancef orBaddebt si nt hebooksofSTEAM Co.hadacr edi
tbalanceof
P8,900atthecloseofcalendaryear2003. Dur ing2004,uncol
l
ecti
bleaccount
sP7,250 were
writ
tenoffagainsttheall
owance. Thepr ovi
sionfordoubtf
ulaccount
siscomputedat3%of
thenetsalesfortheyear. ThecreditbalanceintheAll
owanceaccountatDecember31,2004
amountedt oP14,775. Thenetsalesfor 2004i s:
a. P 492,500
b. P 437,500
c. P 296,667
d. P notgiven

11. WI LCONCompanyhasan8%not ereceiv

abl edatedJune30, 2002i
ntheori
ginalamount
ofP150,
000. PaymentsofP50,000inprincipalplusaccruedint
erest aredueannuall
yonJuly
01,2003,2004and2005. How muchi sthei nter
estrevenuethatshouldberecognizedby
WILCONfortheyearendedDecember31, 2004?
a. P 2,000
b. P 4,000
c. P 6,000
d. P 8,000

12. MASTERCo.pur chasedfrom RoyalCo.aP20, 000,8%,5y earnotethatrequi

redf
ive
annualy
earendpayment sofP5,009. Thenot ewasdi
scount edtoy i
elda9%r atetoMASTER.
Atthedateoft
hepurchase,MASTERr ecor
dedthenoteatitspresentvalueofP19,485.
Howmuchi sthet
otalint
erestr
evenueearnedbyMASTERov ertheli
feoft hi
snote?
a. P 9,
000
b. P 8,
000
c. P 5,
560
d. P 5,
045

13. OnJul y01,2004,UNI ON Co.soldgoodsi nexchangef oraP200,000,8mont hnon

i
nter
estbear
ingnoter
eceivabl
e. Att heti
meoft hesal
e,thenote'smar
ketrateofi
nter
estwas
12%. OnSeptember01,2004. UNI ONdiscountedt
henotewiththebankat10%.
Howmuchwast heamountr ecei
vedbyUNI ONf r
om t
hediscounti
ngofthenote?
a. P 188,
000
b. P 190,
000
c. P 193,
800
d. P 194,
000

14. PRI MECo.r ecei

vedf r
om acust omeraoney ear
,P500,000not
ebear
ingannuali
nter
est
of8%. Afterhol
dingthenotef orsixmont hs,PRIMEdiscountedt
henot
eatAsianBankatan
eff
ecti
vei
nter
estrateof10%
Atthedat
eofdiscounti
ng,PRIMEshoul drecognize
a. P40,000interestrevenue
b. P23,810interestr
evenue
c. P13,000interestr
evenue
d. P4,762interestexpense

15. AYALA Cor

por
ati
onent
eredi
ntoanassi
gnmentagr
eementwi
thaf
inancecompany
 1
4
wherebyitwoul dadvanced80%ofal laccountsassignedlessaP2, 000servi
cecharge. Dur i
ng
thecurr
enty ear,P400,000ofaccount srecei
vablewereassigned. P250, 000coll
ecti
onswer e
madeonout standi
ngassi gnedaccountsandP230, 000wasr emi t
tedtothef i
nancecompany .
Theremittanceincl
udedi nter
estchargesofP2,300. Salesret
urnsandal l
owancesonassi gned
account
samount edtoP5, 000.
Howmuchi st heequityofAYALACor porati
onintheassignedaccountrecei
vableatthe
endofthey ear?
a. P 60,
000
b. P 57,
700
c. P 55,
000
d. P 82,
700

16. Rev i
ewing the account sreceivable ofDARE Cor p.as atDecember31,2004,y ou
obt
ainedthefoll
owingi nformati
on:
a. DARECor p.estimatedther equir
edal l
owancef ordoubt f
ulaccountsusingthe
yearendagi ngofaccountr ecei
vable.
b. All
owancef ordoubt
fulaccount,January01,2004,P32,500.
c. Provi
sionsmadedur ingt
hey ear2003f ordoubt
fulaccount s(2%ofcredi
tsal
es
ofP3,000,000).
d. Uncoll
ect i
bleaccountswritt
enoffonOct ober31,2004, P40,000.
e. Esti
mat eddoubt f
ulaccountsperagi ngonDecember31, 2004,P57,
500.

Afteryearendadj
ust
ment
s,t
hedoubt
fulaccount
sexpensesofDARECor
p.f
ort
hey
ear
2004shouldbe:
a. P 65,
000
b. P 52,
500
c. P 57,
500
d. P 60,
000

I
tems17,18&19ar ebased ont hefol
lowi
nginfor
mat
ion:
Presented bel
ow areunaudited bal
ancesofselected accountsofLAZY Co.asof
December31,2004:
Accounts Unaudit
edBal ances,
12.
31.04
Debi t Cr
edi
t
Cash P 250,000
Accountsrecei
vable 650,000
All
owancef orDoubtf
ulaccount
s 4,000
Netsales P3,
375,
000

Addi
ti
onali
nfor
mation:
a. Goodsamount i
ngt
oP25,000wer
einvoi
cedfortheaccountsof VaseCo.
,recor
dedon
January02,2005wit
htermsofnet60day s,FOBShi ppi
ngpoint
. Thegoodswer e
shi
ppedtoVaseCo.onDecember30,
2004.

b. Thebankr etur
nedonDecember29,2004acust
omer
’scheckf
orP2,
500mar
ked“
No
suf
fi
cientFunds”butnoent
rywasmade.

c. LAZYCo.esti
matedthatall
owanceforeuncol
lect
ibl
eaccount
sshoul dbeoneandone
hal
fpercent(
1½%)oft heaccountsrecei
vabl
ebalanceasofy earend. Noprov
isi
on
hasyetbeenmadefor2004.

17. Whati
stheadj
ust
edbal
anceoftheaccount
srecei
vabl
eonDecember31,
2004?
a. P 650,000
b. P 675,000
c. P 652,500
d. P 677,500

18. Whatist
headjust
edbal
anceoftheAl l
owancef
orDoubt
fulaccount
sonDecember32,
2004?
a. P 4,000.00
b. P 14,162.
50
 1
5
c. P 18,
162.
50
d. P 10,
162.
50

19. Whati
stheadj
ust
edbal
anceoftheBadDebtsexpensesaccount
?
a. P 6,162.50
b. P 10,162.
50
c. P 14,162.50
d. P 18,162.50

20. OnJul y01,2004,LEAD Co.sol dgoodsinexchangeforaP800,000,8month,non

i
nterestbeari
ngnotereceiv
able. Att heti
meoft hesale,t
henot
e'smar ketr
atewas12%.
LEADCo.r ecei
vedP760,
000wheni tdi
scountedt
henoteat10%. WhendidLEADCo.discount
thenote?
a. July01,2004
b. August01,2004
c. October01,2004
d. September01,2004

21. LI LLYCo.'
sal
lowanceforuncol
lect
ibl
eaccountswasP200,000attheendof2004and
P360,000attheendof2003. Theaccountwasdebit
edin2004t owri
teof
fwort
hlessaccounts
ofP12,000. Howmuchdi dLILLYCo.r
eportasbaddebtsexpensesi
nitsi
ncomestatementfor
theyearendedDecember31,2004?
a. P 64,000
b. P 24,000
c. P 40,000
d. P 16,000

22. OnJune01,2004,JALcor p.sol

dmerchandisewithalistpri
ceofP100, 000toSt arCo.
onaccount
. JALall
owedt radediscount
sof30%and20%. Cr edi
ttermswer e2/10,n/60and
sal
ewasmadeFOBShi ppi
ngPoint . JALCor
p.prepaidP4,000ofdeliv
erycostsforStarCo.as
anaccommodation. OnJune12,2004,JALr eceivedfrom StarCo.ar emitt
ancei nf ul
l
paymentamount
ingto
a. P 58,
880
b. P 60,
000
c. P 50,
880
d. P 52,
000

23. OnJul y01,2004,acompanyobtai

nedatwoyearnoterecei
vableforserv
icesr
ender
ed.
Thef aceamountoft henoteandtheenti
reamountoftheint
erestaredueonJune30,2006.
I
nterestreceivabl
eatDecember31,2004was8%oft hefacev al
ueoft henote. Whatisthe
note'
sinterestrat
e?
a. 32%
b. 4%
c. 8%
d. 16%

END