PROBLEM 10-37
Tantrum Company provided the following information in relation to accounts receivable on
December 31, 2014:
Days outstanding
Estimated Amount
% Uncollectible
0 - 60
1,200,000
1%
61 – 120
900,000
2%
Over 120
1,000,000
6%
3,100,000
During the current year, the entity wrote off P70,000 in accounts receivable and recovered
P20,000 that had been written off in prior years. On January 1, 2014, the allowance for
uncollectible accounts was P60,000. Under the aging method, what amount of uncollectible
accounts expense should be reported for the current year?
ADA
a. 90,000
SOLUTION:
70,000
20,000
b. 80,000
1,200,000 X 1% = 12,000
60,000
c. 70,000
900,000 X 2% = 18,000
10,000
d. 60,000
1,000,000 X 6% = 60,000
80,000
90,000
90,000
ANSWER:
B
PROBLEM 10-38
Aghast Company sold goods to wholesalers on terms 2/15, net 30. The entity had no cash sales
but 50% of the customers took advantage of the discount. An analysis of the accounts
receivable considered collectible at year-end revealed the following:
0 – days
5,000,000
100%
16 – 30 days
3,000,000
95%
31 – 60 days
250,000
90%
Over 60 days
50,000
50%
What amount should be reported as allowance for sales discount?
a.
b.
c.
d.
200,000
100,000
83,000
50,000
ANSWER: C
SOLUTION:
5,000,000
3,000,000
250,000
50,000
8,300,000
8,300,000 X 50% = 4,150,000
4,150,000 X 2% = 83,000
PROBLEM 10-39
On December 31, 2014, Ludicrous Company reported accounts receivable of P6,000,000 and
allowance for doubtful accounts of P300,000 before year-end adjustment:
Outstanding
Accounts receivable
Probability of collection
Under 15 days
3,000,000
.96
16 – 30 days
2,000,000
.90
31 – 45 days
400,000
.80
46 – 60 days
300,000
.70
61 – 75 days
200,000
.65
Over 75 days
100,000
.00
The accounts which have been outstanding over 75 days and have zero probability of collection
would be written off immediately. What is the appropriate balance for the allowance for
doubtful accounts on December 31, 2014?
560,00 0
660,000
260,000
360,00
a.
b.
c.
d.
SOLUTION:
3,000,000 X .96 = 2,880,000
2,000,000 X .90 = 1,800,000
400,000 X .80 = 320,000
300,000 X .70 = 210,000
200,000 X .65 = 130,000
100,000 X .00 = 0
5,340,000
ADA
6,000,000
300,000
5,700,000
360,000
5,340,000
ANSWER: D
PROBLEM 10-40
Namesake Company reported the following unadjusted balances on December 31, 2014.
DEBIT
CREDIT
Accounts receivable
3,000,000
Allowance for doubtful accounts
10,000
Net credit sales
8,000,000
The entity estimated that 3% of the gross accounts receivable would become uncollectible.
What amount should be reported as doubtful accounts expense for the current year?
a.
b.
c.
d.
240,000
100,000
90,000
80,000
SOLUTION:
ADA
100,000
10,000
90,000
ANSWER: B