Practical Auditing by Empleo 2022 Chapter 4 Receivables Related Revenues
Practical Auditing by Empleo 2022 Chapter 4 Receivables Related Revenues
1. D 2. C 3. C 4. C 5. B
6. D 7. D 8. B 9. B 10. A
11. D 12. B
Problem 1
1. A
2. E
3. B, E
4. A,C,D
5. A,C,D
6. A,C
7. D
8. C,D
9. D
10. D
11. D
12. A,B,C
13. D
14. E
15. E
c. No adjustment
d. Sales 40,000
Accounts Receivable 40,000
e. Sales 60,000
Accounts Receivable 60,000
Inventory 33,600
Cost of Sales 33,600
f. Sales 120,000
Accounts Receivable 120,000
h. No adjustment
38
Chapter 4
Receivables and Related Revenues
j. Accounts Receivable 90,000
Sales 90,000
4. Sales 24,000
Accounts Receivable – E 24,000
5. Inventory 16,500
Cost of Sales 16,500
6. Sales 60,000
Accounts Receivable - F 15,000
Advances from Customers 45,000
7. Sales 85,000
Accounts Receivable – G 85,000
Inventory 59,000
Cost of Sales 59,000
8. Sales 2,500
Accounts Receivable – H 2,500
10,000 / 200 x (200 – 150) = 2,500
9. Sales 180,000
Accounts Receivable – I 180,000
39
Chapter 4
Receivables and Related Revenues
Problem 4 (Blooms Company)
Account Per client Adjustment Per audit Not due 1-60 days 61-120 days Over 120
Past due past due days past
due
1 14,000 14,000 3,000 8,000 3,000
2 25,000 25,000 25,000
3 98,000 (98,000) 0
4 44,000 44,000 24,000 20,000
5 68,000 68,000 8,000 60,000
6 15,000 15,000 15,000
Total 264,000 (98,000) 166,000 36,000 83,000 27,000 20,000
40
Chapter 4
Receivables and Related Revenues
2. Allowance for Doubtful Accounts 4,200
Accounts Receivable – Over 120 days 4,200
Audit Adjustments:
Sales 2,732,900
Accounts Receivable 2,732,900
Sales 3,260,700
Accounts Receivable 3,260,700
41
Chapter 4
Receivables and Related Revenues
Problem 7
Percentage of uncollectible accounts = Net wiriteoffs up to 2016 Net credit sales up to 2016
= 160,000 / 10,000,000 = 1.6%
Principal P100,000
Interest for the entire term 3,333
Discount (103,333 x 8% x 4/12) ( 2,756)
Proceeds from discounting P 100,577
Carrying value, date of discounting 100,000
Gain on sale of notes P 577
42
Chapter 4
Receivables and Related Revenues
Face P200,000
PV = 200,000 x .7972 159,440
Discount P 40,560
43
Chapter 4
Receivables and Related Revenues
(c) Interest Income from Long-term Receivables
On NR from Sale of Division
January 1, 2017 – March 31, 2017 P3,000,000 x 9% x 3/12 P67,500
April 1, 2017 – December 31, 2017 P2,000,000 x 9% x 9/12 135,000
Total P202,500
On NR from Officer
P6,000,000 x 9% P540,000
On NR from Sale of Patents
P1,714,600 x 8% x 3/12 P 34,292
On NR from Sale of Land
P2,240,000 x 4/12 P746,667
Total interest income P1,523,459
44
Chapter 4
Receivables and Related Revenues
Gain on Sale of Land (400,000 -346,100) 400,000
Loss on Sale of Land 346,100
Discount on Notes Receivable 746,100
Current Assets:
Note Receivable from Company A
P550,000 – (P1,743,445 x 10%) P119,345
Note Receivable from Company C, including
Accrued interest of P25,000 325,000
Total P444,345
Non-current Assets:
Note Receivable from Company A (P1,743,445 – P119,345) P1,624,100
Note Receivable from Company B 2,404,160
Total Non-current Receivables P4,028,260
Interest Income:
From Company A P200,000
From Company B 150,260
From Company C 25,000
Total P375,260
Corrections:
Info # 7: On December 1, the corporation received payment from Germany Company for one of the
P15,000 notes (instead of P8,000).
45
Chapter 4
Receivables and Related Revenues
Trade Notes Receivable – Caloocan 80,000
Interest Receivable:
Tomas Dee = 75,000 x 8% x 133/360 = P 2,300
Felicity Ltd. = 48,000 x 8% x 60/360= 640
46
Chapter 4
Receivables and Related Revenues
Germany Company = 45,000 x 12% x 60/360 900
Total P 3,840
Computations
10. No impairment loss shall be recognized, the loss évent is a non-adjusting évent, which présents condition different
from that as of the end of the reporting period.
11. No impairment loss shall be recognized on Company Y’s note. The interest to be collected during the extended term
equals the original interest rate of the loan ; the présent value of future cash inflow shall be equal to the loan’s carrying
value.
13. The non-adjusting évent requires disclosure, because even when taken alone, the loss would have a material effect on
the financial condition of 5-6.
47
Chapter 4
Receivables and Related Revenues
MEEMEE, Inc.
Adjusting Entries:
48
Chapter 4
Receivables and Related Revenues
6. Cash in Bank – BPI CA Payroll 15,600
Accrued Payroll 15,600
5,200 + 10,400
49
Chapter 4
Receivables and Related Revenues
Total required allowance P17,457
Balance of allowance 22,000
Adjustment (4,543)
Answers:
(a) Petty Cash P8,240
(b) BPI SA depository 257,794
(c) BPI CA Payroll 76,250
(d) BPI CA Gen Disb. 214,150
(e) Security Bank SA 400,625
(f) Cash 556,434
(g) Accounts Receivable (Gross) 769,574
(h) Allowance for Bad Debts 17,457
(i) Bad Debts Expense 19,457
(j) Notes Receivable 18,000
(k) Liability on Discounted Notes 8,000
(l) Interest Receivable 517
(m) Interest Income 4,586
(n) Receivables from Officers and Employees 9,700
(o) Customer Credit Balances 13,800
50