DEPARTMENT OF ACCOUNTANCY 2 nd Semester A.Y.

2020-2021Conceptual Framework and

Accounting Standards – Accounts Receivable

Case 1: Pikachu Company had the following information for 2021 relating to its accountsreceivable:

Accounts receivable on January 1 P1,300,000

Credit sales 5,400,000
Collections from customers, excluding recovery 4,750,000
Accounts written off 125,000
Collection of account written off in prior year 25,000

On December 31, 2021, what is the balance of accounts receivable, before allowancefor doubtfulaccounts?
__________________________

Case 2: The following data were taken from the records of Raichu Company for
theyearendedDecember 31, 2021:

Sales on accounts P3,600,000 Notes received to settle accounts 400,000 Provision for
doubtful accounts 90,000 Accounts receivable determined to be worthless 25,000
Purchase on account 3,900,000 Payment to creditors 3,200,000 Discounts allowed by
creditors 260,000 Merchandise returned by customer 15,000 Collections received to
settle accounts 2,450,000 Notes given to creditors in settlement of accounts 250,000
Merchandise returned to suppliers 70,000 Payments on notes payable 100,000
Discounts taken by customers 40,000 Collections received in settlement of notes
180,000

What is the net realizable value of accounts receivable on December 31, 2021? _________________

Case 3: The financial statement of Katherine Company included the following information: January

December
01, 2021
31, 2021
Accounts receivable P1,200,000
Allowance for doubtful accounts 60,000
Sales P8,000,000 Cash collected from customers 7,000,000

The cash collection included a recovery of P10,000 from a customer whose account hadbeenwrittenoff
as worthless in 2020. During 2021, it was necessary to recognize doubtful
accountsexpenseofP100,000 and write off worthless customers’ accounts of P30,000. On December 1,
2021, acustomersettled an account by issuing a 12%, six month note for P400,000. What is the net
realizablevalueof
accounts receivable on December 31, 2021? ____________________________

Case 4: The following transactions affecting the accounts receivable of Gastly

Companytookplaceduring the year ended December 31, 2021:

Sales (Cash and Credit) P5,900,000Cash received from credit customers, all of whom took
advantage of the discount feature of the company’s credit terms 4/10, n/303,024,000

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Cash received from cash customers 2,100,000Accounts receivable written off as worthless
50,000Credit memorandum issued to credit customers for sales returns and allowances 250,000Cash
refunds given to cash customers for sales returns and allowances 20,000Recoveries on accounts
receivable written off as uncollectible in prior periods (not

included in cash amount stated above) 80,000The following balance were taken from the January 1,

2021 statement of financial position:

Accounts receivable P950,000

Allowance for doubtful accounts 100,000

The entity provided for uncollectible account losses by crediting allowance for doubtful accountsinthe
amount of P70,000 for the current year.

⮚ What is the balance of accounts receivable on December 31, 2021? ________________⮚

What is the balance of allowance for doubtful accounts on December 31, 2021?___________

Case 5: Haunter Company prepared an aging of accounts receivable on December 31,

2021anddetermined that the net realizable value of the accounts receivable was P2,500,000.
Additionalinformation is available as follows:

Allowance for doubtful accounts on January 1 P 280,000 Accounts written off as

uncollectible 230,000 Accounts receivable on December 31 2,700,000 Uncollectible
accounts recovery 50,000

For the year ended December 31, 2021, what amount should be recognized as doubtful
accountsexpense? _______________________________

Case 6: Gengar Company’s allowance for doubtful accounts was P1,000,000 at theendof
2021andP900,000 at the end of 2020. For the year ended December 31, 2021, Gengar
reporteddoubtfulaccounts expense of P160,000 in its income statement. What amount did Gengar debit
totheappropriate account in 2021 to write off uncollectible accounts? __________________________

Case 7: All of Lapras Company’s sales are on a credit basis. The following
informationisavailableforthe current year:

Allowance for doubtful accounts – January 1 P 180,000 Sales 9,500,000 Sales

returns and allowances 800,000 Sales discounts 200,000 Accounts written off as
uncollectible 200,000

Lapras provides for doubtful accounts expense at the rate of 3% of net sales. What is theallowancefor
doubtful accounts at year-end? ______________________________

Case 8: From inception of operations to December 31, 2021, Krabby Corporationprovidedforuncollectible

accounts receivable under the allowance method: provisions were mademonthly2%ofcredit sales; bad
debts written off were charged to the allowance account; recoveriesof baddebtspreviously written off were
credited to the allowance account; and no year-end adjustmentstotheallocation account were made.
Krabby’s usual credit terms are net 30 days.

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The balance in the allowance for doubtful accounts were P130,000 at January 1, 2021. During2021,credit
sales totaled P9,000,000, interim provisions for doubtful accounts were madeat 2%of creditsales; P90,000
of bad debts were written off, and recoveries of accounts previouslywrittenoffamounted to P15,000. Krabby
installed a computer facility in November, 2021, andanagingofaccounts receivable was prepared for the first
time as of December 31, 2021. A summaryof theagingis as follows:

Balance in
Classification by
Estimated %
Each
Month of Sale
Uncollectible
Category
Nov – Dec 2021 P1,140,000 1.5%
Jul – Oct 600,000 8.0
Jan – June 400,000 35.0
Prior to 1/1/2021 130,000 70.0

Further audit procedures revealed that a P160,000 customer credit balanceresultingfromoverpayment was
included in the “Nov-Dec, 2021” receivables and that based onthereviewofcollectability of the account
balances in the “prior to 1/1/2021” aging category, additional receivablestotaling P60,000 were written off
as of December 31, 2021.

Effective with the year ended December 31, 2021, PDA adopted the revised
accountingstandardsinrecognizing bad debts.

⮚ What is the correct balance of the allowance for doubtful accounts at

year-end?______________________

⮚ What is the correct bad debt expense for the year? _____________________ ⮚ What is the carrying

value of the accounts receivable at year-end? ________________

END OF TOPIC – ACCOUNTS RECEIVABLE

ESV
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