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Accounts Receivable Activity

Valencia Company reported accounts receivable balances and sales transactions for 2023. Using this information, determine the balance of accounts receivable on December 31, 2023. Gerbera Company reported accounts receivable transactions and credit sales for 2023. Using this information, calculate the bad debts expense, allowance for bad debts, and net realizable value of accounts receivable for 2023 under three different methods. Wilhelm Company reported credit sales, cash receipts, write-offs, and recoveries for 2022 and 2023. Using this information and the company's bad debts estimation methods, determine the bad debts expense and allowance for bad debts ending balances for both years.

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Yang Jungwon
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772 views

Accounts Receivable Activity

Valencia Company reported accounts receivable balances and sales transactions for 2023. Using this information, determine the balance of accounts receivable on December 31, 2023. Gerbera Company reported accounts receivable transactions and credit sales for 2023. Using this information, calculate the bad debts expense, allowance for bad debts, and net realizable value of accounts receivable for 2023 under three different methods. Wilhelm Company reported credit sales, cash receipts, write-offs, and recoveries for 2022 and 2023. Using this information and the company's bad debts estimation methods, determine the bad debts expense and allowance for bad debts ending balances for both years.

Uploaded by

Yang Jungwon
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ACCOUNTS RECEIVABLE

A. VALENCIA Company reported the following amounts for the year 2023:
Accounts Receivable, Jan 1 P450,000
Cash Sales, 1,800,000
Credit Sales, 4,060,000
Cash received from credit customer, 4,230,000
Sales returns from cash/paid sales, 80,000
Sales returns from credit sales, 55,000
Accounts ascertained to be worthless, 18,000

Required: From this information, determine the balance of accounts receivable on Dec 31, 2023.

B. During 2023, GERBERA Company had the following transactions involving its accounts receivable
and allowance for bad debts:
1. Accounts amounting to P420,000 were written off.
2. P140,000 recoveries of accounts previously written-off.
3. Credit sales amounted to P10,000,000
4. Allowance for bad debts, beginning P540,000
5. Accounts Receivable, Dec 31 P6,000,000

Required: Under each of the following independent methods, determine the (a) bad debts expense; (b)
allowance for bad debts; and (c) net realizable value of accounts receivable:

1. Percentage of sales method, 2% credit sales.


2. Accounts receivable method using 5% of outstanding accounts receivable.
3. Aging of sales method using the following breakdown of AR balance:
Age bracket Amounts % of uncollectible
Less than 1 month P4,000,000 2%
1 month to 3 months 1,400,000 4%
More than 3 months 600,000 30%

C. WILHELM Company reported the following information for the year 2022 to 2023:

2022 2023
12,500,00
Credit sales 0 14,000,000
Cash sales 1,500,000 1,800,000
12,200,00
Receipts from credit sales excluding recoveries 0 14,300,000
Accounts written-off 160,000 450,000
Recoveries 40,000 10,000
Allowance for bad debts and accounts receivable at the beginning of 2022 amounted to
P460,000 and P7,600,000, respectively. Consistently, the company estimates its bad debts by
applying 2% of the amount of credit sales. However, starting 2023 the company estimated
allowance for bad debts equal to 5% of ending accounts receivable balance.

Required: Determine the bad debts expense and allowance for bad debts ending balances for
2022 and 2023.

D. On Jan 1, 2023, BRITAIN Company who is currently experiencing collection issues with its
receivables, pledged its accounts receivable amounting to P5,000,000 to a bank. In return, the
company issued a 2-year 7% P4,000,000 promissory note. Interest is payable every Dec 31.

Required: Journal entries for the year 2023.

E. Using the data in letter D, assume that BRITAIN assigned the accounts receivable in exchange for
a bank loan. The assignee bank will loan 80% of the amount of the receivables and will charge
12% interest. Bank service charge is 1% of the loaned amount. After a month, accounts of
P2,000,000 were collected less P20,000 sales discount. Accounts of P24,500 were written-off.

Required: Journal entries for 2023 assume that the assignment was made under (a) non-notification;
and (b) notification basis.

F. To accelerate the collection of its receivables, CLAW Company entered a regular and with
recourse factoring arrangement with a factor. During the month of Sept 2023, the company
factored P3,000,000 of its receivable wherein, the factor withheld 25% of the factored
receivables balance. In addition, commission of 5% and advanced interest of 12% based on the
average period of 30 days before the receivables are collected from the customers were
charged. Recourse liability had a fair value of P150,000 on the date of factoring.

Required: Journal entries related to the factoring.

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