On December 31, 2020, the “Receivables” account of MG Company shows a debit balance of P2,000,000. The allowance for doubtful accounts shows a credit balance of P50,000. The subsidiary ledger shows the following details: Trade accounts receivable P775,000 Trade notes receivable 100,000 Installment receivable, due 1-2 years 300,000 Customer’s account reporting credit balances arising from sales returns (30,000) Advance payments for purchase of merchandise 150,000 Customer’s account reporting credit balances
Problem 1
On December 31, 2020, the “Receivables” account of MG Company shows a debit balance of P2,000,000. The
allowance for doubtful accounts shows a credit balance of P50,000. The subsidiary ledger shows the following
details:
Trade
Trade notes receivable 100,000
Installment receivable, due 1-2 years 300,000
Customer’s account reporting credit balances
arising from sales returns (30,000)
Advance payments for purchase of merchandise 150,000
Customer’s account reporting credit balances
arising from advance payments (20,000)
Advances to subsidiary 400,000
Claim from insurance company 15,000
Subscription receivable, due in 60 days 300,000
Accrued interest receivable 10,000
REQUIRED:
1. Compound entry to reclassify the receivable account:
2. The amount to be presented as “Trade and other receivables” under current assets_____________
Problem 2
At the end of the year before making any adjustments, the
items among others:
Accounts receivable 500,000
Notes receivable 200,000
Estimated uncollectible accounts 20,000
Sales 5,000,000
Sales returns and allowances 30,000
Sales discounts 20,000
REQUIRED:
1. Prepare the adjusting
assumptions:
a. The company experience indicates that the 75% of all sales are credit sales and that an average of
2% of credit sales may prove uncollectible.
_________________________________________
b. One percent of gross sales may prove uncollectible.
Adjusting entry: _________________________________________
_________________________________________
c. An analysis of the aging of trade receivables indicates that accounts receivable in the amount of
P80,000 may prove uncollectible.
Adjusting entry: _________________________________________
_________________________________________
d. The company policy is to maintain an allowance/estimated uncollectible accounts equal to 10% of
the outstanding accounts receivable.
Adjusting entry: _________________________________________
_________________________________________
2. Compute the Net Realizable Value of the accounts receivable and the Uncollectible Accounts Expense
in each assumption:
Uncollectible Accounts Expense Net Realizable Value
a. _____________________________ _________________
b. _____________________________ _________________
c. _____________________________ _________________
d. _____________________________ _________________
Trending now
This is a popular solution!
Step by step
Solved in 4 steps