CHAPTER 4
PROBLEM 6: FOR CLASSROOM DISCUSSION
1. Solution:
Accounts receivable (158K + 15K) 173,000
Allowance for uncollectible accounts (8,000)
Total trade receivables 165,000
Claim for tax refund 12,000
Dividends receivable 220,000
Advances to officers (due in 6 months) 180,000
Total non-trade receivables 412,000
Total current receivables 577,000
Notes receivable (non-trade) 180,000
Advances to affiliates 900,000
Security deposit on a long-term lease 30,000
Total noncurrent receivables 1,110,000
TOTAL RECEIVABLES 1,687,000
2. Solutions:
a. FOB shipping point, freight collect
Dec. 27, 20x1 -
No entry
Dec. 31, 20x1 Accounts receivable 1,600
Sales 1,600
to record sale on account
Jan. 2, 20x2 -
No entry
Jan. 5, 20x2 Cash 1,600
Accounts receivable 1,600
to record settlement of accounts receivable
b. FOB destination, freight prepaid
Dec. 27, 20x1
No entry
-
Dec. 31, 20x1 Prepaid freight 50
Cash 50
to record prepayment of freight to the carrier
Jan. 2, 20x2 Accounts receivable 1,600
Sales 1,600
to record sale on account
Jan. 2, 20x2 Freight-out 50
Prepaid freight 50
to charge the prepaid freight to expense
Jan. 5, 20x2 Cash 1,600
Accounts receivable 1,600
to record settlement of accounts receivable
c. FOB shipping point, freight prepaid
Dec. 27, 20x1
No entry
-
Dec. 31, 20x1 Accounts receivable 1,650
Sales 1,600
Cash 50
to record sale on account and freight paid on behalf of the buyer
Jan. 2, 20x2 -
No entry
-
Jan. 5, 20x2 Cash 1,650
Accounts receivable 1,650
to record collection of account receivable inclusive of reimbursement for
the freight paid
d. FOB destination, freight collect
Dec. 27, 20x1
No entry
-
Dec. 31, 20x1 -
No entry
-
Jan. 2, 20x2 Accounts receivable 1,550
Freight-out 50
Sales 1,600
to record sale on account and freight accommodated by the buyer
Jan. 5, 20x2 Cash 1,550
Accounts receivable 1,550
to record collection of account receivable net of reimbursement for the
freight
3. Solutions:
Requirement (a): Traditional GAAP
Gross method Net method
1. Sale on account
Accounts receivable 90,000 Accounts receivable 87,300
Sales 90,000 Sales 87,300
(₱100,000 x 90%) (₱100,000 x 90% x 97%)
2. Collection is made within the discount period
Cash 87,300 Cash 87,300
Sales discounts (90K x 3%) 2,700 Accounts receivable 87,300
Accounts receivable 90,000
3. Collection is made beyond the discount period.
Cash 90,000 Cash 90,000
Accounts receivable 90,000 Sales discount forfeited 2,700
Accounts receivable 87,300
Requirement (b.1): PFRS 15
Invoice amount (100,000 x 90%) 90,000
Multiply by: 3%
Total available discount 2,700
Multiply by: 80%
Discount expected to be taken 2,160
Invoice amount 90,000
Less: Discount expected to be taken (2,160)
Transaction price 87,840
1. Sale on account
Accounts receivable 87,840
Revenue 87,840
2. Portion collected within the discount period
Cash (90,000 x 80% x 97%) 69,840
Accounts receivable 69,840
3. Portion collected beyond the discount period
Cash (90,000 x 20%) or (87,840 – 69,840) 18,000
Accounts receivable 18,000
Requirement (b.2): PFRS 15
1. Sale on account
Accounts receivable (100K x 90%) 90,000
Revenue 90,000
Sales discount 2,160
Allowance for sales discount 2,160
2. Portion collected within the discount period
Cash on hand (90,000 x 80% x 97%) 69,840
Allowance for sales discount 2,160
Accounts receivable (90,000 x 80%) 72,000
3. Portion collected beyond the discount period
Cash on hand [(90K x 20%) or remaining balance] 18,000
Accounts receivable 18,000
