Accounts Receivable- EXERCISES
Trade and other receivables
Use the following information for the next two questions:
Information from the records of ABC Co. is shown below:
 Accounts receivable - net of P8,000 100,0
credit balance in customers' accounts
00
15,00
 Notes receivable (trade)
0
 Notes receivable (non-trade), P15,000 30,00
collectible within one year
0
 Dividends receivable
2,000
 Subscriptions receivable
2,000
 Advances to officers and employees
(due in 10 months)
4,000
 Accounts payable - net of P10,000
debit balance in
suppliers' accounts
3,000
1. How much is the total trade receivables?
a. 108,000
b. 118,000 c. 123,000 d. 133,000
2. How much is the total current receivables?
a. 156,000
b. 144,000 c. 150,000 d. 154,000
Trade receivables:
Accounts receivable
Add back credit balance in customers' accounts
Adjusted accounts receivable
Notes receivable (trade)
Total trade receivables
Non-trade receivables currently collectible:
Notes receivable (current portion only)
Dividends receivable
Advances to officers and employees
Advances to suppliers (from debit balance in accounts payable)
Total current non-trade receivables
Trade and other receivables
100,000
8,000
108,000
15,000
123,000
15,000
2,000
4,000
10,000
31,000
154,000
Goods in-transit
3. On December 27, 20x1, ABC Co. received a sale order for a credit sale of
goods with selling price of ₱3,000. The goods were shipped by ABC on
December 31, 20x1 and were received by the buyer on January 2, 20x2.
The related shipping costs amounted to ₱20. ABC Co. collected the
receivable on January 5, 20x2. If the term of the sale is FOB destination,
freight collect, how much net cash is collected on January 5, 20x2?
a. 3,020
b. 3,000
3000-20= 2980
Dec. 31, 20x1
Jan. 2, 20x2
c. 2,980
d. 0
No entry
Accounts receivable
Freight-out
Sales
990
10
1,000
to record sale on account and freight accommodated by the buyer
Jan. 5, 20x2
Cash on hand
Accounts receivable
990
990
to record collection of account receivable net of reimbursement for
the freight
Gross method and Net method
Use the following information for the next two questions:
STALWART STRONG Co. sells inventory with a list price of ₱200,000 on
account under credit terms of 20%, 10%, 2/10, n/30.
4. If STALWART uses the gross method, how much is the debit to account
receivable on initial recognition?
a. 114,120
b. 144,000
c. 200,000
d. 141,120
200,000 x 80% x 90% = 144,000
5. If STALWART uses the net method, how much is the debit to account
receivable on initial recognition?
a. 114,120
b. 144,000
c. 200,000
d. 141,120
200,000 x 80% x 90% x 98% = 141, 120
Allowance for sales return
The next two questions are based on the following information:
On December 31, 20x1, ABC Co. sold goods for ₱20,000 to XYZ, Inc. on
account. To induce sale, ABC Co. provides its buyers the right to return goods
within 30 days upon purchase if the buyers are not satisfied with the goods.
Case #1: Reliable estimate
6. ABC Co. can reliably estimate that 20% of the goods sold will be returned
within the agreed period of time. However, 25% of the goods are actually
returned on January 5, 20x2. How much is the net accounts receivable
recognized on the date of sale?
a. 20,000
b. 16,000 c. 15,000 d. 0
Solution:
Case #2: No reliable estimate
7. ABC Co. cannot reliably estimate future returns. much is the net accounts
receivable recognized on the date of sale?
a. 20,000
b. 16,000 c. 15,000 d. 0
Percentage of credit sales method
8. ABC Co. has the following information on December 31, 20x1 before any
year-end adjustments.
Allowance for doubtful accounts, Jan. 1
30,400
Write-offs
19,000
Recoveries
3,800
Sales (including cash sales of ₱380,000)
2,280,000
Sales returns and discounts (including ₱3,800 sales returns
22,800
on cash sales)
Accounts receivable, Dec. 31
570,000
Percentage of credit sales
3%
How much is the recoverable historical cost of accounts receivable?
a. 498,370
b. 502,630 c. 486,780 d. 478,970
Total sales
Cash sales
Gross credit sales
Sales returns and discounts on credit sales (22,800 – 3,800)
Net credit sales
Multiply by: Percentage of net credit sales
Bad debt expense
Write-off
Dec. 31 (squeeze)
Allowance for
doubtful accounts
30,400
19,000
3,800
56,430
71,630
Accounts receivable, Dec. 31 – gross
Allowance for doubtful accounts, Dec. 31
Accounts receivable, Dec. 31 – net
2,280,000
(380,000)
1,900,000
(19,000)
1,881,000
3%
56,430
Jan. 1
Recoveries
Bad debts expense
570,000
(71,630)
498,370
Percentage of receivable method
Use the following information for the next two questions:
ABC Co. has the following information on December 31, 20x1 before any
year-end adjustments.
Accounts receivable, Jan. 1
80,000
Net credit sales
270,000
Collections from customers (including recoveries)
140,000
Allowance for doubtful accounts, Jan. 1
10,000
Write-offs
5,000
Recoveries
1,000
Percentage of receivables
5%
9. How much is the bad debt expense?
a. 4,250
b. 4,300
c. 4,550
d. 10,300
10. How much is the recoverable historical cost of accounts receivable?
a. 194,750
b. 200,450
c. 196,250
d. 195,700
Solution:
The ending balance of accounts receivable is computed as follows:
Accounts receivable
Jan. 1
80,000
5,000 Write-off
Collections on accounts,
excluding recovery
Net credit sales
270,000 139,000 (140,000 - recovery of 1,000)
206,000
Dec. 31 (squeeze)
The required balance of allowance for doubtful accounts as of December 31, 20x1 is computed as
follows:
Accounts receivable, Dec. 31
206,000
Percentage of receivables
5%
Allowance for doubtful accounts - Dec. 31
10,300
The bad debt expense for the year is computed as follows:
Allowance for doubtful accounts
10,000 Jan. 1
Write-off
5,000
1,000 Recovery
4,300
Bad debts expense (squeeze)
Dec. 31
10,300
Solution:
Accounts receivable, Dec. 31 – gross
Allowance for doubtful accounts, Dec. 31
Accounts receivable, Dec. 31 – net
206,000
(10,300)
195,700
Computation of percentage
11. ABC Co. has been recognizing bad debt expenses based on the direct
write-off method. In 20x4, ABC Co. decided to change to the allowance
method and that doubtful accounts shall be estimated using the
percentage of receivables method. The percentage is to be computed
based on all available historical data up to a maximum of four years.
Information for five years is shown below:
Year
Write-offs
Recoveries
Net credit sales
20x0
10,000
600
80,000
20x1
7,000
1,000
100,000
20x2
10,000
3,000
160,000
20x3
15,000
5,000
200,000
20x4
28,000
2,000
240,000
70,000
11,600
780,000
The balances of accounts receivables on January 1, 20x4 and December 31,
20x4 are ₱100,000 and ₱200,000, respectively.
How much is the doubtful accounts expense to be recognized in 20x4?
a. 19,900
b. 34,000 c. 35,000 d. 24,600
Solution:
Formula: Percentage = (Write-offs – Recoveries) ÷ (Net credit sales)
The percentages to be applied on the beginning and ending balances of receivables in 20x4 are
computed as follows:
(Total Write-offs from 20x0 to 20x3) less (Total Recoveries from 20x0 to
Percentage (Jan. 1,
20x3)
20x4)
=
Total Net credit sales from 20x0 to 20x3
= [(10K+7K+10K+15K) – (.6K+1K+3K+5K)] ÷ (80K+100K+160K+200K)
= (42,000 – 9,600) ÷ 540,000
Percentage (Jan. 1, 20x4) = (32,400 ÷ 540,000) = 6%
(Total Write-offs from 20x1 to 20x4) less (Total Recoveries from 20x1 to
20x4)
Total Net credit sales from 20x1 to 20x4
= [(7K+10K+15K+28K) – (1K+3K+5K+2K)] ÷ (100K+160K+200K+240K)
= (60,000 – 11,000) ÷ 700,000
Percentage (Dec. 31, 20x4) = (49,000 ÷ 700,000) = 7%
Percentage (Dec. 31,
20x4)
=
The doubtful accounts expense is computed as follows:
Allowance for doubtful accounts
6,000 Jan. 1, 20x4 (6% x 100,000)
28,000
2,000 20x4 recoveries
34,000 Bad debts expense (squeeze)
20x4 write-offs
Dec. 31, 20x4 (7% x 200,000)
14,000
Aging based on days outstanding
12. ABC Co. has the following information:
Days outstanding
Receivable balances
0 – 60
180,000
61 – 120
135,000
Over 120
150,000
Total accounts receivables
465,000
% uncollectible
1%
2%
6%
During the year, ABC Co. wrote off ₱10,500 receivables and recovered
₱6,000 that had been written-off in prior years. The allowance for doubtful
accounts has a beginning balance of ₱3,000.
How much is the doubtful accounts expense for the year?
a. 20,000
b. 25,000 c. 15,000 d. 30,000
Solution:
Requirement (a): Doubtful accounts expense
Days outstanding
Receivable balances
(a)
0 – 60
61 – 120
Over 120
Totals
180,000
135,000
150,000
465,000
% uncollectible
Required allowance
(b)
(c) = (a) x (b)
1%
2%
6%
1,800
2,700
9,000
13,500
The doubtful accounts expense is computed as follows:
Allowance for doubtful accounts
3,000 Beg. bal.
Write-offs 10,500
6,000 Recoveries
15,000 Doubtful accounts expense (squeeze)
End. Bal. 13,500
Aging based on days past due
13. ABC Co. sells to wholesalers on terms of 2/15, net 30. An analysis of
ABC Co.’s trade receivable balances at December 31, 20x1, revealed the
following:
Receivable
Age in days
balances
0 – 15
180,000
16 – 30
108,000
31 – 60
90,000
61 – 90
72,000
91 – 120
54,000
121 – 150
36,000
Total accounts
540,000
receivables
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ABC Co. uses the aging of receivables method. The estimated percentages of
collectibility based on past experience are shown below.
Accounts which are overdue for less than 31 days
97%
Accounts which are overdue 31 – 60 days
90%
Accounts which are overdue 61 – 90 days
85%
Accounts which are overdue 91 – 120 days
65%
Accounts which are overdue for over 120 days
40%
The allowance for doubtful accounts has a balance of ₱18,000 as of January
1, 20x1. Write-offs and recoveries during the year amounted to ₱6,000 and
₱3,000, respectively.
How much is the doubtful accounts expense for the year?
a. 15,600
b. 9,000
c. 22,600 d. 28,200
Solution:
Receivable
balances
(a)
Days past due
 Not due (cash discounts available) - 0 to 15 days
180,000
 Not due (cash discounts forfeited) - 16 to 30 days
108,000
of age
of age
 1 - 30 days past due
 31 - 60 days past due
 61 - 90 days past due
 91 - 120 days past due
Totals
% Uncollectible
(b)
90,000
72,000
54,000
36,000
540,000
Required
allowance
(a) x (b)
None
-
None
3%
10%
15%
35%
2,700
7,200
8,100
12,600
30,600
Doubtful accounts expense for the year is computed as follows:
Allowance for doubtful accounts
18,00
0
Beg. bal.
Write-offs
End. Bal.
6,000 3,000
15,60
0
30,60
0
Recoveries
Doubtful accounts expense (squeeze)
Combination of methods
Use the following information for the next two questions:
ABC Co. has the following information on December 31, 20x1 before any
year-end adjustments.
Net credit sales
6,300,000
Accounts receivable, December
976,500
Allowance for doubtful accounts, Dec. 31 (before any
53,550
necessary year-end adjustments)
Percentage of credit sales
2%
The aging of receivables is shown below:
Days outstanding
Receivable balances
0 – 60
378,000
61 – 120
283,500
Over 120
315,000
Total accounts
976,500
receivables
% uncollectible
1%
2%
6%
Additional information:
 ABC Co. uses the percentage of credit sales in determining bad debts in
monthly financial reports and the aging of receivables for its annual
financial statements.
 Accounts written-off during the year amounted to ₱119,700 and accounts
recovered amounted to ₱28,350.
 As of December 31, ABC Co. determined that ₱63,000 accounts receivable
from a certain customer included in the “61-120 days outstanding” group
is 95% collectible and a ₱31,500 account included in the “Over 120 days
outstanding” group is worthless and needs to be written-off.
14. How much is the balance of the allowance for doubtful accounts on
January 1, 20x1?
a. 12,600
b. 18,900 c. 19,200 d. 23,400
Allowance for doubtful accounts
18,900 Jan. 1, 20x1 (squeeze)
119,700
28,350 Recoveries
Unadjusted bad debts
126,000
(6.3M x 2%)
53,550
Dec. 31 unadjusted bal.
Write-offs
15. How much is the adjusted bad debt expense to be reported in the yearend financial statements?
a. 123,300
b. 128,700 c. 143,300 d. 132,300
Solution:
Days outstanding
 0 – 60
 61 - 120 (283.5K – 63K)
 Segregated account
 Over 120 (315K – 31.5K)
Totals
Receivable
balances
% uncollectible
Required
allowance
(a)
(b)
(c) = (a) x (b)
378,000
220,500
63,000
283,500
945,000
Allowance for doubtful accounts
18,900
1%
2%
5%
6%
3,780
4,410
3,150
17,010
28,350
Write-offs
(119.7K + 31.5K)
151,20
0
28,350
132,30
0
12/31/x1 bal.
28,350
Debit balance in allowance for doubtful accounts
16. ABC Co. has the following information before any year-end adjustment.
Accounts receivable, Dec. 31
200,000
Allowance for doubtful accounts, Jan. 1
6,000 (Dr.)
Percentage of receivables
2%
Recoveries and write-offs during the year amounted to ₱1,000 and ₱7,600,
respectively.
How much is the bad debts expense for the year?
a. 3,400 b. 4,600
c. 16,600 d. 10,600
Solution:
Allowance for doubtful accounts
Beg. bal. – debit
6,000
Write-offs
7,600
1,000 Recoveries
16,60
0
Bad debts expense (squeeze)
End. Bal. (200,000 x 2%)
4,000