PROBLEM 4-1
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 the same date.
Subsidiary details revealed the following:
Trade accounts receivable
Trade notes receivable
Installments receivable, normally due 1 year to two years
Customers' accounts reporting credit
balances arising from sales returns
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
a. Prepare one compound entry to reclassify the receivables account.
Accounts receivable
Notes receivable
Installments receivable
Advances to suppliers
Advances to subsidiary
Claims Receivable
Subscription Receivable
Accrued Interest Receivable
Advances from Customers
Customers' Accounts
w/ Credit Balance
775,000
100,000
300,000
150,000
400,000
15,000
300,000
10,000
(20,000)
(30,000)
RECEIVABLES
2,000,000
b. Compute the amount to be presented as “trade and other receivables” under current
assets.
Account
Classification
Presentation
Trade accounts receivable
Accounts Receivable
CA
Trade notes receivable
Installments receivable, normally due 1 year to
two years
Notes Receivable
CA
Installment Receivable
CA
Customers' accounts reporting credit
balances arising from sales returns
Advance payments for purchase of merchandise
Payables
CL
Advances to suppliers
CA
Payables (advances)
CL
Customers' accounts reporting credit
balances arising from advance payments
Cash advance to subsidiary
Advances to subsidiary
NCA
Claim from insurance entity
Claims Receivable
CA
Subscriptions receivable due in 60 days
Subscriptions Receivable
CA
Accrued interest receivable
Accrued Int. receivable
CA
Accounts receivable
Allow. For Doubtful Accounts
Notes receivable
Installments receivable
Advances to suppliers
Claims Receivable
Subscription Receivable
Accrued Interest Receivable
775,000
(50,000)
Trade & Other Rec’l (current)
725,000
100,000
300,000
150,000
15,000
300,000
10,000
1,600,000
PROBLEM 4-2
Credible Company provided the following T-account summarizing the transactions affecting the
accounts receivable for the current year:
Jan. 1 Balance
Charge sales
Shareholders'
subscriptions
Deposit on Contract
Claims against common
carrier for damages
IOUs from employees
Advances to affiliates
Advances to supplier
Accounts Receivable
600,000 Collections from customers
6,000,000 Write-off
Merchandise returns
200,000 Allowances to customer
120,000
for shipping damages
Collections on carrier claims
100,000 Collections from subscription
10,000
100,000
50,000
5,300,000
35,000
40,000
25,000
40,000
50,000
a. Compute the correct amount of accounts receivable.
Accounts receivable, beg.
Charge sales
Total
Less:
Collections from Customers
Write-off
Merchandise Returns
Allowances to customers
Accounts receivable, ending.
600,000
6,000,000
6,600,000
5,300,000
35,000
40,000
25,000
5,400,000
1,200,000
b. Prepare one compound entry to adjust the accounts receivable.
Subscriptions Receivable
Deposit on Contract
Claims Receivable
Advances to Employees
Advances to Affiliates
Advances to Suppliers
Accounts Receivable
150,000
120,000
60,000
10,000
100,000
50,000
490,000
c. Compute the amount to be presented as trade and other receivables under current assets.
Accounts Receivable, end
Claims Receivable
Advances to Employees
1,200,000
60,000
10,000
Advances to Suppliers
Trade and other Receivables
50,000
1,320,000
d. Indicate the classification and presentation of items.
Account
Explanation
Presentation
Jan. 1 Balance
Beginning AR Balance
Charge Sales
Increases AR Balance
Shareholders Subscriptions
Subscriptions Receivable
Deposit on Contract
Special Deposits on Contract
Claims against common carrier
Claims Receivable
IOUs from employees
Advances to employees
Cash advance to affiliates
Advances to affiliates
NCA
Advances to supplier
Advances to supplier
CA
Collections from customers
Decreases AR Balance
Write-off
Decreases AR Balance
Merchandise Returns
Decreases AR Balance
Allow. To customer for shipping damage
Decreases AR Balance
Collection from carrier claims
Decreases claims receivable
Collection on subscription
Decreases subscription receivable
SHE
CA
CA
PROBLEM 4-3
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.
Prepare journal entries to record the transactions under the following freight terms:
a. FOB Destination and Freight Collect
To record sale:
Accounts Receivable
Freight Out
Sales
Allowance for Freight Charge
To record collection:
Cash
Sales Discount
Allowance for Freight Charge
Accounts Receivable
500,000
10,000
500,000
10,000
475,000
15,000
10,000
500,000
b. FOB Destination and Freight Prepaid
To record sale:
Accounts Receivable
Freight Out
Sales
Cash
To record collection:
Cash
Sales Discount
Accounts Receivable
500,000
10,000
500,000
10,000
485,000
15,000
500,000
c. FOB Shipping Point and Freight Collect
To record sale:
Accounts Receivable
Sales
500,000
To record collection:
Cash
Sales Discount
Accounts Receivable
485,000
15,000
500,000
500,000
d. FOB Shipping Point and Freight Prepaid
To record sale:
Accounts Receivable
Sales
Cash
To record collection:
Cash
Sales Discount
Accounts Receivable
510,000
500,000
10,000
495,000
15,000
510,000
PROBLEM 4-4
Fiancee Company records sales returns during the year as a credit to accounts receivable.
However, at the end of the accounting period, the entity estimates the probable sales returns
and records the same by means of an allowance account.
The following transactions occurred in summary form:
Sale of merchandise on account
Collection within the discount period
Collection within the discount period
Sales returns granted
Sales return estimated at the end of the year
4,000,000
1,470,000
1,000,000
100,000
20,000
Prepare journal entries to record the transactions.
1
Accounts Receivable
Sales
4,000,000
Cash
Sales Discount
Accounts Receivable
1,470,000
30,000
Cash
1,000,000
4,000,000
2
1,500,000
3
Accounts Receivable
1,000,000
4
Sales Return
Accounts Receivable
100,000
100,000
5
Sales Return
Allow. For Sales Returns
20,000
20,000
PROBLEM 4-5
On June 15, 2022, Romela Company sold 100 air conditioning units. The sale price for each unit
is P45,000. All of sales are subjected to terms 2/10, n/30. The entity used the gross method for
accounting for accounts receivable.
a. Prepare journal entry to record the sale.
Accounts Receivable
Sales
4,500,000
4,500,000
b. Prepare journal entry to record receipt of payment assuming the correct amount was
received June 25, 2022.
Cash
Sales Discount
Accounts Receivable
4,410,000
90,000
4,500,000
c. Prepare journal entry to record receipt of payment assuming the correct amount was
received July 10, 2022.
Cash
Accounts Receivable
4,500,000
4,500,000
PROBLEM 4-6
On February 14, 2022, Prime Company sold 50 air conditioning units. The sale price for each unit
is P50,000. All of the sales are subjected to terms 2/10, n/30. The entity used the net method
for accounting for accounts receivable.
a. Prepare journal entry to record the sale.
Accounts Receivable
Sales
2,450,000
2,450,000
b. Prepare journal entry to record receipt of payment assuming the correct amount was
received June 25, 2022.
Cash
Accounts Receivable
2,450,000
2,450,000
c. Prepare journal entry to record receipt of payment assuming the correct amount was
received July 10, 2022.
Cash
Accounts Receivable
Sales Discount Forfeited
2,500,000
2,450,000
50,000
PROBLEM 4-7
Raven Company started business in March 2022. Sales for the first year totaled P4,000,000. The
entity priced its merchandise to a yield of 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 a
sale price of P300,000.
Prepare journal entries to record sales, sales returns and the year-end adjusting entry for
estimated sales returns.
a. Sales
Accounts Receivable
Sales
4,000,000
4,000,000
b. Sales Returns
Sales Return
Accounts Receivable
300,000
300,000
c. AJE for estimated sales returns
Est. Sales Return
Less:
Actual Sales Returns
BALANCE
400,000
300,000
100,000
Sales Return
Allow. For Sales Return
100,000
100,000