Practice sample materials - Applied Auditing PDF

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PagePage 11 “Libyae Lustare” “Libyae Lustare”ACTG 109AACTG 109A–– APPLIED AUDITING APPLIED AUDITING Audit of ReceivablesAudit of ReceivablesNAME:_____________________________________________CNAME:_____________________________________________COURSE & YEAR: __________________OURSE &...

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ACTG 109A

APPLIED APPLIED AUDITING AUDITING

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Audit Audit of of Receivables Receivables

NAME:_____________________________________________COURSE NAME:_____________________________________________COURSE&&YEAR: YEAR:______________ _____________

1. 1. Red Red Co. Co. had had P3 P3 million million in in accounts accounts receivable receivable recorded recorded on on its its books. books. Red Red wanted wanted to to convert convert the the receivables to cash in a more timely manner than waiting waiting the 45 days for payment as indicated o Which of the following would alter the timing of Red's cash flows for the the P3 million in receivables alre on its books? a. Change the due date of the invoice. outstanding.. b. Factor the receivables outstanding c. c. Discount Discount the the receivables receivables outstanding. outstanding. d. Demand payment from customers before the due date. Tigasin Company required additional cash for its operation and used accounts receivable to raise cash, as follows:  On December1, 2010 Tigasin Company assigned on a non-notification non-notification basis accounts accounts P5,000,000 to a bank in consideration for a loan of 90% of the receivables less than a 5% on on the accounts accounts assigned. assigned. Tigasin signed signed a a note note for for the the bank loan. On On December 31, 31, 2 collected collected assigned assigned accounts accounts of of P3,000,000 P3,000,000 less less discount discount of of P200,000. P200,000. Tigasin Tigasin remitted remitted th th to to the the bank bank in in partial partial payment payment for for the the loan. loan. The The bank bank applied applied first first the the collection collection to to the the int int balance to the principal. The agreed interest is 1% per month on the loan balance.  Tigasin Tigasin Co. Co. sold sold P1,550,000 P1,550,000 of of accounts accounts receivable receivable for for P1,340,000. P1,340,000. The The receivables receivables ha ha amount of P1,470,000 and were sold outright on a nonrecourse basis.  Tigasin Co. received an advance of P300,000 from Union Bank by pledging P360,000 receivable.  On June 30, 2010, Tigasin Co. discounted at a bank a customer’s P600,000, 6 -mont receivable receivable dated dated April April 30, 30, 2010. 2010. The The bank bank discounted discounted the the note note at at 12% 12% on the same date. 

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2. 2. In In its its December December 31, 31, 2010 2010 statement statement of of financial financial position, position, Tigasin Tigasin should should report report note note payable payable liability at? 1,745,000 1,745,000 3. Tigasin Company’s equity in the assigned accounts receivable as of December 31, 31, 2010 is? 255 25 4. Journal entries in recording the sale of accounts receivable Cash 1,340,000 ADA 80,000 Loss on factoring 130,000 Accts Receivable 1,550,000 5. 5. The The proceeds proceeds from from the the note note receivable receivable discounted discounted on on June June 30, 30, 2010? 2010? 604,800 6. On October 31, 2015, Kevin Company engaged in the following transactions: transactions:  Obtained a P500,000, six-month six-month loan from City Bank, discounted at 12%. The com P500,000 of accounts receivable as security for the loan.  Factored Factored P1,000,000 P1,000,000 of of accounts accounts receivable receivable without without recourse recourse on on aa non-notificatio non-notificati Gru Company. Gru charged a factoring fee of 2% o off the amount of receivables withheld 10% of the amount factored. What is the total cash received from the financing of receivables? P1,350,000 P1,350,000 

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7. Isaac Co. assigned P500,000 of accounts receivable to Dixon Finance Co. as security for a loan Dixon charged a 2% commission on the amount of the loan; the interest interest rate rate on on the the note note was was 10% 10% first first month, month, Isaac collected P110,000 P110,000 on assigned accounts after after deducting deducting P380 of discounts. Is Is returns worth P1,350 and wrote off assigned accounts totalling P3,700. P3,700. The The amount of cash Isaac Dixon at the time of the transfer was? P411,600 8. On September 30, 2015, Bay Company discounted at the bank bank a a customer customer P6,000,000, P6,000,000, 12-mon 12-mon...