Problem 1 The following summarizes the transactions recorded in the Accounts receivable – trade account of Pratt Corporation: Accounts Receivable – Trade Balance forwarded, net of P9,000 credit balance Charge sales ... Charge for consignment sales . Shareholders' subscriptions . Receipts from customers, including overpayment of P10,000 106,000 1,250,000 Write offs ... 25,000 Merchandise returns ... 60,000 Allowance to customers for 1,240,000 7,000 5,500 3,000 2,000 45,000 shipping damages Recovery of previous write-offs Refunds to customers with credit balances ... 5,000 Collections on carrier claims . 5,000 Collection on subscription . 50,000 Deposit on contract . Claim against common carrier for shipping damages IOUS from employees Cash advances to affiliate Advances to supplier .. 5,000 1,000 50,000 10,000 Audit notes: a) It was ascertained that half of the adjusted outstanding accounts receivable – trade balance are still currently collectible. The term of sale is 5/30, n/60. Based on past experience, a 25% of customers whose accounts are still current normally pay within the discount period. b) 30% of the adjusted accounts receivable – trade is 60 days past due and is expected to be only 90% collectible. c) 20% of the adjusted accounts receivable – trade balance is more than 120 days past due and is expected to be 50% collectible. Required: 1) Prepare the necessary adjusting journal entries. 2) What is the correct accounts receivable – trade balance? 3) What is the carrying value of the accounts receivable – trade?
Problem 1 The following summarizes the transactions recorded in the Accounts receivable – trade account of Pratt Corporation: Accounts Receivable – Trade Balance forwarded, net of P9,000 credit balance Charge sales ... Charge for consignment sales . Shareholders' subscriptions . Receipts from customers, including overpayment of P10,000 106,000 1,250,000 Write offs ... 25,000 Merchandise returns ... 60,000 Allowance to customers for 1,240,000 7,000 5,500 3,000 2,000 45,000 shipping damages Recovery of previous write-offs Refunds to customers with credit balances ... 5,000 Collections on carrier claims . 5,000 Collection on subscription . 50,000 Deposit on contract . Claim against common carrier for shipping damages IOUS from employees Cash advances to affiliate Advances to supplier .. 5,000 1,000 50,000 10,000 Audit notes: a) It was ascertained that half of the adjusted outstanding accounts receivable – trade balance are still currently collectible. The term of sale is 5/30, n/60. Based on past experience, a 25% of customers whose accounts are still current normally pay within the discount period. b) 30% of the adjusted accounts receivable – trade is 60 days past due and is expected to be only 90% collectible. c) 20% of the adjusted accounts receivable – trade balance is more than 120 days past due and is expected to be 50% collectible. Required: 1) Prepare the necessary adjusting journal entries. 2) What is the correct accounts receivable – trade balance? 3) What is the carrying value of the accounts receivable – trade?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question
Transcribed Image Text:Problem 1
The following summarizes the transactions recorded in the Accounts receivable – trade account of Pratt Corporation:
Accounts Receivable – Trade
Balance forwarded, net of
P9,000 credit balance
Charge sales ....
Charge for consignment sales
Shareholders' subscriptions
Receipts from customers,
including overpayment of P10,000
106,000
1,250,000 | Write offs ...
25,000 Merchandise returns
1,240,000
7,000
5,500
60,000 Allowance to customers for
Recovery of previous write-offs
Refunds to customers with credit balances ...
5,000
5,000 | Collection on subscription
50,000
shipping damages
Collections on carrier claims
3,000
2,000
45,000
Deposit on contract
Claim against common carrier for
shipping damages
IOUS from employees
Cash advances to affiliate
Advances to supplier
5,000
1,000
50,000
10,000
Audit notes:
a) It was ascertained that half of the adjusted outstanding accounts receivable – trade balance are still currently collectible.
The term of sale is 5/30, n/60. Based on past experience, a 25% of customers whose accounts are still current normally
pay within the discount period.
b) 30% of the adjusted accounts receivable – trade is 60 days past due and is expected to be only 90% collectible.
c) 20% of the adjusted accounts receivable – trade
collectible.
alance
more than 120 days past due and is expected to be 50%
Required:
1) Prepare the necessary adjusting journal entries.
2) What is the correct accounts receivable – trade balance?
3) What is the carrying value of the accounts receivable – trade?
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