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The document provides information about the accounts receivable balance of Banayoyo Corporation for the year ended December 31, 2006. It reveals that accounts receivable includes current and past due trade receivables, uncollectible accounts, credit customer balances, dishonored notes receivable, and consignment shipments. It also provides the balance of the allowance for doubtful accounts before audit adjustment and estimates what the allowance should be. The questions ask you to determine the adjusted balances of trade accounts receivable, allowance for doubtful accounts, and doubtful accounts expense based on the information provided and your audit results. The suggested solutions show the calculations to arrive at the answers, which are C for trade accounts receivable, B for allowance

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1K views1 page

2 1

The document provides information about the accounts receivable balance of Banayoyo Corporation for the year ended December 31, 2006. It reveals that accounts receivable includes current and past due trade receivables, uncollectible accounts, credit customer balances, dishonored notes receivable, and consignment shipments. It also provides the balance of the allowance for doubtful accounts before audit adjustment and estimates what the allowance should be. The questions ask you to determine the adjusted balances of trade accounts receivable, allowance for doubtful accounts, and doubtful accounts expense based on the information provided and your audit results. The suggested solutions show the calculations to arrive at the answers, which are C for trade accounts receivable, B for allowance

Uploaded by

riza147
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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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Cebu CPAR Center, Inc. www.Cebu-CPAR.

com
PROBLEM NO. 2
Your audit of Banayoyo Corporation for the year ended December 31, 2006 revealed that the
Accounts Receivable account consists of the following:
Trade accounts receivable (current) P3,440,000
Past due trade accounts 640,000
Uncollectible accounts 128,000
Credit balances in customers’ accounts (80,000)
Notes receivable dishonored 240,000
Consignment shipments – at cost
The consignee sold goods costing P96,000 for P160,000. A 10%
commission was charged by the consignee and remitted the balance to
Banayoyo. The cash was received in January, 2007. 320,000
Total P4,688,000

The balance of the allowance for doubtful accounts before audit adjustment is a credit of P80,000.
It is estimated that an allowance should be maintained to equal 5% of trade receivables, net of
amount due from the consignee who is bonded. The company has not provided yet for the 2006 bad
debt expense.

Questions:
Based on the above and the result of your audit, determine the adjusted balance of following:
1. Trade accounts receivable
a. P4,080,000 c. P4,464,000
b. P3,440,000 d. P3,584,000
2. Allowance for doubtful accounts
a. P204,000 c. P172,000
b. P216,000 d. P179,200
3. Doubtful accounts expense
a. P264,000 c. P252,000
b. P220,000 d. P227,200

Suggested Solution:

Question No. 1
Trade receivables (current) P3,440,000
Past due trade accounts 640,000
Notes receivable dishonored 240,000
Consignment goods already sold (P160,000 x 90%) 144,000
Adjusted trade receivables P4,464,000

Question No. 2
Adjusted trade receivables P4,464,000
Less due from consignee 144,000
Basis of allowance for doubtful accounts 4,320,000
Bad debt rate 5%
Required allowance for doubtful accounts P 216,000

Question No. 3
Required allowance for doubtful accounts P216,000
Add write-off of uncollectible accounts 128,000
Total 344,000
Less allowance account before adjustment 80,000
Doubtful accounts expense P264,000
Answers: 1) C; 2) B; 3) A

PROBLEM NO. 3
Presented below are a series of unrelated situations. Answer the following questions relating to each
of the independent situations as requested.
1. Bantay Company’s unadjusted trial balance at December 31, 2006, included the following
accounts:
Debit Credit
Accounts receivable P1,000,000
Allowance for doubtful accounts 40,000
Sales P15,000,000
Sales returns and allowances 700,000

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