Marissa Gingo - Trade and Non-Trade Receivables PDF

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Problem 1 Todestole Company recorded 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 Installment receivables, 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 Subscription receivable due in 60 days Accrued interest receivable

P

775,000 100,000 300,000 (30,000) 150,000

P

(20,000) 400,000 15,000 300,000 10,000 2,000,000

Required: 1. Prepare one compound entry to reclassify the receivables account. (5 points) 2. Compute the amount to be presented as “trade and other receivables” under current assets. (5 points) 3. Indicate the classification and presentation of the other items excluded from “trade and other receivables” (5 points)

1. Accounts receivable Notes receivable Installment receivables Advances to suppliers Advance payment to subsidiary Claim receivable Subscriptions 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

2. Accounts receivables Allowance for doubtful accounts Notes Receivable Installments receivables Advances to suppliers Claim Receivable Subscription receivables 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

3. Advances of the subsidiary should be classified as non-current and presented as a long term investment. Customer’s credit balances should be classified as current liabilities and to be included as part of trade and other payables

Problem 2 Tripartite Company sold merchandise on account for P1,000,000. The terms are 3/10, n/30. The related freight charge amount to P100,000. The amount was collected during the discount period Required: Prepare journal entries to record the sale and payment transactions under the following freight terms: 1. FOB destination and freight collect (2 points) Accounts Receivable 1,000,000 Freight Out 100,000 Sales 1,000,000 Allowance for freight change 100,000 Cash 870,000 Sales Discount 30,000 Allowance for freight change 100,000 Accounts receivable 1,000,000 2. FOB destination and freight prepaid (2 points) Accounts receivable 1,000,000 Freight out 100,000 Sales 1,000,000 Cash 100,000 Cash Sales discount

970,000 30,000

Accounts receivable

1,000,000

3. FOB shipping point and freight collect (2 points) Accounts receivable 1,000,000 Sales 1,000,000 Cash 970,000 Sales discount 30,000 Accounts receivable 1,000,000 4. FOB shipping point and freight prepaid (2 points) Accounts receivable 1,100,000 Sale 1,000,000 Cash 100,000 Cash 1,070,000 Sales discount 30,000 Accounts receivable

Problem 3 On February 14, 2020, Fidelity Company sold 100 air conditioning units. The sale price for each unit is P50,000. All of the sales are subject to a 10 percent trade discount subject to terms 2/10, n/30. The entity used the net method of accounting for accounts receivable. Required: 1. Prepare the journal entry to record the sale (1 point) Accounts receivable 5,000,000 Sales revenue 5,000,000 2. Prepare the journal entry to record receipt of the payment assuming the correct amount was received on February 24, 2020 (3 points) Cash 4,900,000 Sales discount 100,000 Accounts receivable 5,000,000 3. Prepare the journal entry to record receipt of the payment assuming the correct amount was received on March 10, 2020 (3 points) Cash 5,000,000 Accounts receivable 5,000,000...