Loans and Receivables Sample Problems 1. Mango Company had the following information relating to its accounts receivable for the year 2005: Accounts receivable – January 1 Credit sales Collection from customers, excluding the recovery of accounts written off Accounts written off as worthless Sales returns Recovery of accounts written off Estimated future sales returns on December 31 Estimated uncollectible accounts on December 31, per aging
12,000,000 20,000,000 17,000,000 300,000 1,000,000 100,000 400,000 1,000,000
Mango should report the December 31, 2005 accounts receivable, before allowance for sales returns and uncollectible accounts, at a. P13,700,000 c. P13,800,000 b. P12,300,000 d. P13,130,000 2. Banana Company operates in an industry that has a high rate of bad debts. On December 31, 2005, before any year-end adjustments, the accounts receivable balance was P20,000,000 and its allowance for doubtful accounts balance was P1,500,000. The year-end balance reported for the allowance for doubtful accounts is based on the following schedule: Time Outstanding Under 30 days 31 - 180 days 181 - 360 days More than one year
Accounts Receivable 10,000,000 5,000,000 3,000,000 2,000,000
Percent Uncollectible 5% 10% 30% 100%
The accounts which have been outstanding for more would be written off immediately. What should be the ended December 31, 2005? a. P1,900,000 c. b. P2,400,000 d.
than one year and 100% uncollectible doubtful accounts expense for the year P3,900,000 P2,000,000
3. Camias Company determined that the net realizable value of its accounts receivable at December 31, 2005 based on an aging of the receivables, was P15,000,000. Additional information is as follows: Allowance for uncollectible accounts – 1/1/2005 Uncollectible accounts written off during 2005 Uncollectible accounts recovered during 2005 Accounts receivable – December 31, 2005
1,500,000 1,000,000 200,000 17,000,000
For 2005, what should be Camias’s uncollectible accounts expense? a. P2,000,000 c. P1,800,000 b. P1,500,000 d. P1,300,000 4. Jennifer Company sells to wholesalers on terms of 5/15, net 30. Jennifer has no cash sale but 50% of customers take advantage of the discount. Jennifer uses the gross method of recording sales. An analysis of trade receivables at December 31, 2005 revealed the following: Age Amount _ Collectible 0 - 15 days 15,000,000 100% 16 - 30 days 3,000,000 95% Over 30 days 2,000,000 1,500,000 On the December 31, 2005 balance sheet, what amount should be reported as allowance for discounts? a. P750,000 c. P375,000 b. P650,000 d. P500,000
5. The following accounts were abstracted from Venus Company’s unadjusted trial balance at December 31, 2005: Debit
Credit
Accounts receivable Allowance for doubtful accounts Net credit sales
P20,000,000 300,000 P70,000,000
Venus estimates that 5% of the gross accounts receivable will become uncollectible. The doubtful accounts expense for the year ended December 31, 2005 should be a. P1,000,000 c. P1,300,000 b. P3,500,000 d. P 700,000 6. All of Umbrella Company’s sales are on a credit basis. available for 2005: Allowance for doubtful accounts, 1/1/2005 Sales Sales returns Accounts written off as uncollectible Recovery of accounts written off
The following information is 1,000,000 22,000,000 2,000,000 600,000 200,000
Umbrella provides for doubtful accounts expense at the rate of 10% of net sales. At December 31, 2005, the allowance for doubtful accounts balance should be a. P3,200,000 c. P2,800,000 b. P2,600,000 d. P2,000,000 7. An entity granted a loan to a client amounting to P300,000 and it carries 5% interest. The interest rate in the market on similar loans is 12%. How much is the interest income to be recognized on December 31, 2013 assuming the loan was granted on July 30, 2013 and is due in 3 years? 8. On January 1, 2013, X Company granted a loan to a client amounting to P500,000 represented by loan contract that carries 4% interest. 100,000 is due every year starting December 31, 2013. The market rate of interest is 12%. Prepare an amortization table. 9. An entity granted two loans. The first loan is evidenced by a three year P800,000 note carrying 8% interest. The second loan is evidenced by a 4 year 1,000,000 note carrying 15% interest. Both loans were granted on January 1, 2013. The first loan requires lump sum payment upon maturity while the second loan requires equal principal payments every year. Assuming the market interest rate is 12%: a. Prepare the amortization table of each loan b. Determine the total interest income to be recognized each year
