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Intacc PROB 1-8
BS Accountancy (Pamantasan ng Cabuyao)
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Problem 1:
Dreamer Company reported the “Receivables” account with a debit balance of P2,000,000 at year-end. The allowance for doubtful
accounts had a credit balance of P50,000 on same date.
Subsidiary details revealed the following:
Trade accounts receivable
Trade notes receivable
Installment receivable, normally due 1 year to two years
Customers’ accounts reporting credit balances arising from sales return
Advance payments for purchase of merchandise
Customers’ accounts reporting credit balances arising from advance payments
Cash advance to subsidiary
Claim from insurance entity
Subscriptions receivable due in 60 days
Accrued interest receivable
775,000
100,000
300,000
(30,000)
150,000
(20,000)
400,000
15,000
300,000
10,000
2,000,000
Required:
a. Prepare one compound entry to reclassify the receivables account.
b. Compute the amount to be presented as “trade and other receivables” under current assets.
c. Indicate the classification and presentation of the other items excluded from “trade and other receivables”.
Problem 2:
Affectionate Company sold merchandise on account for P500,000. The terms are 3/10, n/30. The related freight charge amounted to
P10,000. The account was collected within the discount period.
Required:
Prepare journal entries to record the transactions under the following freight terms:
a. FOB destination and freight collect
b. FOB destination and freight prepaid
c. FOB shipping point and freight collect
d. FOB shipping point and freight prepaid
a. Allowance for sales return
Accounts receivable should be adjusted due to the probability that some customers will return goods that are unsatisfactory, or
will make other claims requiring reduction in the amount due as in the case of shipment shortages and defects.
Problem 3:
Raven Company started business in January 2021. Sales for the first year totaled P4,000,000. The entity priced its merchandise to yield a
40% gross profit based on sales. Industry statistics suggest that 10% of the merchandise sold to customers will be returned. The entity
estimated sales returns based on the industry average. During the year, customers returned goods with sale price of P300,000.
Required:
Prepare journal entries to record sales, sales returns and the year-end adjusting entry for estimated sales returns.
Problem 4:
On March 15, 2021, Romela Company sold 100 air conditioning units. The sale price for each unit is P45,000. All of sales are subject to
terms 2/10, n/30. The entity used the gross method of accounting for accounts receivable.
Required:
1. Prepare journal entry to record the sale
2. Prepare journal entry to record receipt of the payment assuming the correct amount was received on March 25, 2021.
3. Prepare journal entry to record receipt of the payment assuming the correct amount was received on April 9, 2021.
Problem 5:
On February 14, 2021, Prime Company sold 50 air conditioning units. The sale price for each unit is P50,000. All of the sales are subject
to terms 2/10, n/30. The entity used the net method of accounting for accounts receivable.
Required:
1. Prepare journal entry to record the sale
2. Prepare journal entry to record receipt of the payment assuming the correct amount was received on February 24, 2021.
3. Prepare journal entry to record receipt of the payment assuming the correct amount was received on March 10, 2021.
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Problem 6:
Scion Company began operations on January 1, 2020. On December 31, 2020 and
2021, the entity provided for uncollectible accounts expense based on 1% of annual
credit sales. On January 1, 2021, the entity changed the method of determining the
allowance for uncollectible accounts by applying certain percentages to the aging of
accounts receivable.
In addition, the entity wrote off all accounts receivable
that were over 1 year old. The following additional
information related to the years ended December 31,
2021 and 2020:
Days Past Invoice
Date
0 – 30
31 – 90
91 – 80
Over 180
Credit Sales
Collections, including recovery
Accounts written off
Recovery of accounts previously written off
Required:
1. Determine the allowance for doubtful accounts Days past invoice date
on January 1, 2021.
0 – 30
2. Determine the allowance for doubtful accounts 31 – 90
on December 31, 2021 before adjustment.
91 – 180
3. Determine the required allowance on December Over 180
31, 2021.
4. Prepare the adjustment to record the doubtful accounts expense for the current year.
Percent
Uncollectible
1
5
20
80
2021
3,000,000
2,915,000
27,000
7,000
2020
2,800,000
2,400,000
None
None
300,000
80,000
60,000
25,000
250,000
90,00
45,000
15,000
1. Percent of Accounts Receivable
-A certain rate, usually determined from past experience of the entity, is multiplied by the open accounts at the end of the period
in order to get the required allowance balance.
-This method has the advantage of presenting the accounts receivable fairly in the statement of financial position at net realizable
value. However, it violates the principle of matching bad debt loss against the sales revenue.
-The loss experience rate may be difficult to obtain and may not be reliable.
Problem 7:
At the beginning of current year, Template Company showed the following account balances:
Accounts receivable
1,000,000
Allowance for doubtful accounts
40,000
The following summary transactions occurred during the current year:
1. Sales on account, 2/30, n/30
2. Collections from customers within the discount period
3. Collections from customers beyond the discount period
4. Accounts receivable written off as worthless
5. Recovery of accounts previously written off not included in the above collections
6. Credit memo for sales return
7,000,000
2,450,000
3,900,000
30,000
10,000
70,000
Required:
a. Prepare journal entries pertaining to accounts receivable.
b. Prepare the adjustment for doubtful accounts at year-end if the entity uses the percentage of accounts receivable method
consistently.
c. What is the net realizable value of accounts receivable at year-end?
Problem 8:
At the beginning of current year, Relentless Company reported the following balances:
Accounts receivable
Allowance for doubtful accounts
The following transactions took place in the current year.
1. Sales – cash and credit
2. Cash received from credit customers
3. Cash received from credit customers who took advantage of the 3/10, n/30 credit
terms (included in No. 2)
4. Accounts receivable written off as worthless
5. Cash received from cash customers
6. Credit memo for sales return and allowances issued to credit customers
7. Cash refunds to cash customers
8. Recoveries of accounts written off, not include in above collections
600,000
25,000
3,070,000
2,455,000
1,455,000
20,000
470,000
55,000
10,000
5,000
Required:
1. Prepare journal entries to record the transactions.
2. Prepare the adjustment for doubtful accounts if the entity provides for doubtful accounts equal to 2% of net credit sales.
3. Determine the net realizable value of accounts receivable at year-end.
Problem 9:
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Marvelous Company reported the following information before adjustments at year-end:
Accounts Receivable
Notes Receivable
Allowance for Doubtful Accounts
Sales
Sales Return and Allowances
Sales Discount
500,000
200,000
20,000
5,000,000
30,000
20,000
Required:
Prepare adjusting entry to provide for doubtful accounts under each of the following independent assumptions:
a. Past experience indicates that 75% of all sales are credit sales and that an average 2% of credit sales may prove uncollectible.
b. One percent of gross sales may prove uncollectible.
c. An analysis of the aging of trade receivables indicates that accounts receivable in the amount of P80,000 may prove uncollectible.
d. The policy is to maintain an allowance for doubtful accounts equal to 10% of the outstanding accounts receivable.
Problem 10:
From inception of operations, Savvy Company carried no allowance for doubtful accounts. Uncollectible receivables were expensed as
written off and recoveries were credited to income as collected.
During the current year, management recognized that the accounting policy with respect to doubtful accounts was not correct, and
determined that an allowance for doubtful accounts was necessary. A policy was established to maintain an allowance for doubtful accounts
based on historical bad debt loss percentage applied to year-end accounts receivable.
The historical bad debt loss percentage is to be recomputed each year based on all available past years up to a maximum of five years.
Year
2017
2018
2019
2020
2021
Credit Sales
1,500,000
2,200,000
3,000,000
3,300,000
4,000,000
Accounts
written off
15,000
40,000
50,000
65,000
88,000
Recoveries
-02,000
3,000
5,000
10,000
Accounts receivable balances were P1,250,000 and P2,000,000 on January 1, 2021 and December 31, 2021, respectively.
Required:
1. Prepare journal entry to set up the allowance for doubtful accounts on January 1, 2021.
2. Compute the doubtful accounts expense for the current year.
3. Determine the net realizable value of accounts receivable on December 31, 2021.
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ANSWER:
PROBLEM 1:
a. Accounts receivable
Notes receivable
Installment receivable
Advances to suppliers
Advances to subsidiary
Claims receivable
Subscription receivable
Accrued interest receivable
Customer’s credit balances
Advances from customers
Receivables
775,000
100,000
300,000
150,000
400,000
15,000
300,000
10,000
30,000
20,000
2,000,000
b. Accounts receivable
Allowance for doubtful accounts
Notes receivable
Installment receivable
Advances to suppliers
Claim receivable
Subscription receivable
Accrued interest receivable
Total Trade and Other Receivables
775,000
(50,000)
100,000
300,000
150,000
15,000
300,000
10,000
1,600,000
c. The advances to subsidiary should be classified as noncurrent and presented as long-term investment.
The customer’s credit balances and advances from customers should be classified as current liabilities and included as part of
“Trade and Other Payables”.
PROBLEM 2:
FOB destination and freight collect
1. Accounts receivable
Freight out
Sales
Allowance for freight charge
2. Cash
Sales discount
Allowance for freight charge
Accounts receivable
FOB destination and freight prepaid
1. Accounts receivable
Freight out
Sales
Cash
2. Cash
Sales discount
Accounts receivable
FOB shipping point and freight collect
1. Accounts receivable
Sales
2. Cash
Sales discount
Accounts receivable
FOB shipping point and freight prepaid
1. Accounts receivable
Sales
Cash
2. Cash
Sales discount
Accounts receivable
500,000
10,000
500,000
10,000
475,000
15,000
10,000
500,000
500,000
10,000
500,000
10,000
485,000
15,000
500,000
500,000
500,000
485,000
15,000
500,000
510,000
500,000
10,000
495,000
15,000
510,000
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PROBLEM 3:
Sales
1. Accounts receivable
Sales revenue
4,000,000
4,000,000
Sales Return
2. Sales return
Accounts receivable
300,000
Year-end adjusting entry
3. Sales return
Allowance for sales return
100,000
300,000
100,000
Estimated sales return (10% x 4,000,000)
Actual returns
Balance
400,000
300,000
100,000
PROBLEM 4:
1. Accounts receivable
Sales revenue
4,500,000
2. Cash
Sales discount
Accounts receivable
4,410,000
90,000
3. Cash
Accounts receivable
4,500,000
4,500,000
4,500,000
4,500,000
PROBLEM 5:
1. Accounts receivable
Sales revenue
2,450,000
2. Cash
Accounts receivable
2,450,000
3. Cash
Accounts receivable
Sales discount forfeited*
2,500,000
2,450,000
2,450,000
2,450,000
50,000
*The sales discount forfeited account is classified as other income.
PROBLEM 6:
1. Allowance – 1/1/2021 (1% x 2,800,000)
28,000
2. Allowance – 1/1/2021
Doubtful accounts recorded in 2021 (1% x 3,000,000)
Recovery
Total
Writeoff
Allowance before adjustment
28,000
30,000
7,000
65,000
(27,000)
38,000
3. 300,000 x 1%
80,000 x 5%
60,000 x 20%
25,000 x 80%
Required allowance -12/31/2021
3,000
4,000
12,000
20,000
39,000
4. Doubtful accounts expense
Allowance for doubtful accounts (39,000-38,000)
1,000
1,000
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PROBLEM 7:
Requirement a
1. Accounts receivable
Sales
7,000,000
7,000,000
2. Cash
Sales discount
Accounts receivable (2,450,000/98%)
2,450,000
50,000
3. Cash
Accounts receivable
3,900,000
2,500,000
3,900,000
4. Allowance for doubtful accounts
Accounts receivable
30,000
5. Accounts receivable
Allowance for doubtful accounts
10,000
30,000
10,000
Cash
Accounts receivable
10,000
6. Sales return
Accounts receivable
70,000
10,000
70,000
Requirement b
Doubtful accounts expense
Allowance for doubtful accounts
40,000
40,000
Rate = 40,000/1,000,000 = 4%
Allowance for doubtful accounts - Dec 31 (4% x 1.5M)
Less: Allowance before adjustment
Doubtful accounts expense
Requirement c
Accounts receivable – December 31
Allowance for doubtful accounts
Net realizable value
60,000
20,000
40,000
1,500,000
(60,000)
1,440,000
PROBLEM 8:
Requirement a
1. Accounts receivable
Sales (3,070,000-470,000)
2,600,000
2,600,000
2. Cash (2,455,000-1,455,000)
Accounts receivable
1,000,000
3. Cash
Sales discount
Accounts receivable (1,455,000/97%)
1,455,000
45,000
1,000,000
4. Allowance for doubtful accounts
Accounts receivable
20,000
20,000
5. Cash
Sales
470,000
470,000
6. Sales return and allowances
Accounts receivable
55,000
55,000
7. Accounts receivable
Allowance for doubtful accounts
Cash
Accounts receivable
1,500,000
5,000
5,000
5,000
5,000
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Requirement b
Doubtful accounts expense
Allowance for doubtful accounts
Requirement b
Credit Sales
Less: Sales discount
Sales return and allowances
Net credit sales
50,000
50,000
2,600,000
45,000
55,000
Doubtful accounts (2,500,000 x 2%)
100,000
2,500,000
50,000
Requirement c
Accounts receivable
Less: Allowance for doubtful accounts
Net realizable value
625,000
60,000
1,440,000
PROBLEM 9:
a. Credit Sales (75% x 5,000,000)
3,750,000
Doubtful accounts (2% x 3,750,000)
Doubtful accounts expense
Allowance for doubtful accounts
b. Doubtful accounts expense (1% x 5M)
Allowance for doubtful accounts
75,000
75,000
75,000
50,000
50,000
c. Required allowance
Less: Credit balance of allowance
Doubtful accounts expense
80,000
20,000
60,000
Doubtful accounts expense
Allowance for doubtful accounts
60,000
60,000
d. Required allowance (10% x 500,000)
Less: Credit balance of allowance
Doubtful accounts expense
Doubtful accounts expense
Allowance for doubtful accounts
50,000
20,000
30,000
30,000
30,000
PROBLEM 10:
Rate in 2020 =
170,000 - 10,000
10,000,000
1. Retained earnings (.016 x 1,250,000)
Allowance for doubtful accounts
2. Allowance – January 1, 2021
Recoveries – 2021
Doubtful accounts – 2020 (SQUEEZE)
Total
Less: Writeoff – 2021
Allowance – Dec 31, 2021 (.017 x 2M)
3. Accounts receivable – December 31, 2021
Less: Allowance for doubtful accounts
Net realizable value
= 0.016
Rate in 2021 =
258,000 - 20,000
14,000,000
= 0.017
20,000
20,000
20,000
10,000
92,000
122,000
88,000
34,000
2,000,000
34,000
1,966,000
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