Chapter 4: Accounts Receivable

Problem 4-3: CREDIBLE COMPANY

Requirement 1:

Accounts Receivable, 01/01 600,000.00

Add: Charge Sales 6,000,000.00
Total 6,600,000.00
Less: Collections from Customers (5,300,000.00)
Writeoff (35,000.00)
Merchandise Returns (40,000.00)
Allowance to Customers for Shipping Damages (25,000.00) (5,400,000.00)
Accounts Receivable, 12/31 1,200,000.00

Requirement 2:
Subscription Receivable 150,000
Deposit on Contract 120,000
Claim Receivable 60,000
Advances to Employees 10,000
Advances to Affiliates 100,000
Advances to Supplier 50,000
Accounts Receivable 490,000
Requirement 3:

Accounts Receivable 1,200,000.00

Claim Receivable (100,000 - 40,000) 60,000.00
Advances to Employees 10,000.00
Advances to Suppliers 50,000.00
Total Trade and Other Receivables 1,320,000.00

Requirement 4:

 Subscription Receivable (200,000 – 50,000) – Deduction from Subscribed Share

Capital
 Deposit on Contract – Noncurrent Asset under Other Noncurrent Assets
 Advances to Affiliates – Noncurrent Assets under Long-Term Investments
Problem 4-4: AFFECTIONATE COMPANY
FOB Destination, Freight Collect
a. Accounts Receivable 500,000
Freight Out 10,000
Sales 500,000
Allowance for Freight Charge 10,000
#
b. Cash (500,000 – 10,000 – 15,000) 475,000
Sales Discount (500,000 * 3%) 15,000
 Allowance for Freight Charge 10,000
Accounts Receivable 500,000
FOB Destination, Freight Prepaid
a. Accounts Receivable 500,000
Freight Out 10,000
Sales 500,000
Cash 10,000
#
b. Cash 485,000
Sales Discount 15,000
Accounts Receivable 500,000
FOB Shipping Point, Freight Collect
a. Accounts Receivable 500,000
Sales 500,000
#
b. Cash 485,000
Sales Discount 15,000
Accounts Receivable 500,000
FOB Shipping Point, Freight Prepaid
a. Accounts Receivable 510,000
Sales 500,000
Cash 10,000
#
b. Cash (485,000 + 10,000) 495,000
Sales Discount 15,000
Accounts Receivable 510,000
Problem 4-10: WONDER COMPANY
Requirement 1:
a. Cash 2,100,000
Accounts Receivable (5,900,000 – 2,100,000) 3,800,000
Sales 5,900,000
#
b. Cash 3,024,000
Sales Discount (3,150,000 * 4%) 126,000
Accounts Receivable (3,024,000 / 96%) 3,150,000
#
c. Allowance for Doubtful Accounts 50,000
Accounts Receivable 50,000
#
d. Sales Returns and Allowances 250,000
Accounts Receivable 250,000
#
e. Sales Returns and Allowances 20,000
Cash 20,000
#
f. Cash 80,000
Allowance for Doubtful Accounts 80,000
Requirement 2:

Accounts Receivable, 01/01 950,000.00

Add: Charge Sales 3,800,000.00
Total 4,750,000.00
Less: Collections from Customers (3,024,000.00)
Sales Discounts (126,000.00)
Accounts Written Off (50,000.00)
Sales Returns and Allowances (Credit Customers) (250,000.00) (3,450,000.00)
Accounts Receivable, 12/31 1,300,000.00

Allowance for Doubtful Accounts, 01/01 100,000.00

Add: Provision for Doubtful Accounts for the Current Year 70,000.00
Recovery of Accounts Written Off 80,000.00 150,000.00
Total 250,000.00
Less: Accounts Written Off (50,000.00)
Allowance for Doubtful Accounts, 12/31 200,000.00

Net Realizable Value of Accounts Receivable 1,100,000.00

Chapter 5: Estimation of Doubtful Accounts

Problem 5-2: REVEREND COMPANY
Requirement 1:
a. Cash 470,000
Accounts Receivable (3,070,000 – 470,000) 2,600,000
Sales 3,070,000
#
b. Cash 2,455,000
Sales Discount [(1,455,000 / 97%) * 3%] 45,000
Accounts Receivable (1,500,000 + 1,000,000) 2,500,000
#
c. Allowance for Doubtful Accounts 20,000
Accounts Receivable 20,000
#
d. Sales Returns and Allowances 55,000
Accounts Receivable 55,000
#
e. Sales Returns and Allowances 10,000
Cash 10,000
#
f. Cash 5,000
Allowance for Doubtful Accounts 5,000
Requirement 2:
Doubtful Accounts Expense 50,000
Allowance for Doubtful Accounts 50,000
[(2,600,000 – 45,000 – 55,000) * 2%]
Requirement 3:
 Accounts Receivable, Beginning 600,000.00
Add: Charge Sales 2,600,000.00
Total 3,200,000.00
Less: Collections from Customers (2,455,000.00)
Sales Discounts (45,000.00)
Accounts Written Off (20,000.00)
Sales Returns and Allowances (Credit Customers) (55,000.00) (2,575,000.00)
Accounts Receivable, Ending 625,000.00

Allowance for Doubtful Accounts, Beginning 25,000.00

Add: Provision for Doubtful Accounts for the Current Year 50,000.00
Recovery of Accounts Written Off 5,000.00 55,000.00
Total 80,000.00
Less: Accounts Written Off (20,000.00)
Allowance for Doubtful Accounts, Ending 60,000.00

Net Realizable Value of Accounts Receivable 565,000.00

Problem 5-4: ULYSSES COMPANY

Requirement 1:

Amount % of Uncollectible Required Allowance

Not Yet Due 1,700,000.00 0.00% 0.00
1 - 30 Days Past Due 1,200,000.00 5.00% 60,000.00
31 - 60 Days Past Due 100,000.00 25.00% 25,000.00
61 - 90 Days Past Due 150,000.00 50.00% 75,000.00
Over 90 Days Past Due 120,000.00 100.00% 120,000.00
Total 3,270,000.00 280,000.00

Requirements 2 and 4:

Accounts Receivable, Ending (3,300,000 - 30,000) 3,270,000.00

Allowance for Doubtful Accounts, Beginning 170,000.00

Add: Provision for Doubtful Accounts for the Current Year (SQUEEZE) 345,000.00
Recovery of Accounts Written Off 30,000.00 375,000.00
Total 545,000.00
Less: Accounts Written Off (235,000 + 30,000) (265,000.00)
Allowance for Doubtful Accounts, Ending 280,000.00

Net Realizable Value of Accounts Receivable 2,990,000.00

Requirement 3:
Doubtful Accounts Expense 345,000
Allowance for Doubtful Accounts 345,000
Problem 5-7: SIGMA COMPANY
Requirement 1:
Allowance for Doubtful Accounts, 01/01/2023 (2,800,000 * 1%) = 28,000
Requirement 2:

Allowance for Doubtful Accounts, 01/01/2023 28,000.00

Add: Provision for Doubtful Accounts for the Current Year (3,000,000 * 1%) 30,000.00
Recovery of Accounts Written Off 7,000.00 37,000.00
Total 65,000.00
Less: Accounts Written Off -27,000.00
Allowance for Doubtful Accounts, 12/31/2023 (Before Adjustment) 38,000.00

Requirement 3:

Amount % of Uncollectible Required Allowance

0 - 30 Days 300,000.00 1.00% 3,000.00
31 - 90 Days 80,000.00 5.00% 4,000.00
91 - 180 Days 60,000.00 20.00% 12,000.00
Over 180 Days 25,000.00 80.00% 20,000.00
Total 465,000.00 39,000.00

Requirement 4:
Doubtful Accounts Expense (39,000 – 38,000) 1,000
Allowance for Doubtful Accounts 1,000
Chapter 6: Notes Receivable
Problem 6-1: FEASIBLE COMPANY
2023
01/01 Cash 1,000,000
Notes Receivable 6,000,000
Land 5,000,000
Gain on Sales of Land 2,000,000
#
12/31 Accrued Interest Receivable 720,000
Interest Income (6,000,000 * 12%) 720,000
#
2024
12/31 Accrued Interest Receivable 806,400
Interest Income (6,720,000 * 12%) 806,400
#
2025
01/01 Cash 7,526,400
Notes Receivable 6,000,000
Accrued Interest Receivable 1,526,400
Problem 6-2: BYRON COMPANY
01/01 Notes Receivable 600,000
Sales 540,000
Unearned Interest Income 60,000
#
12/31 Cash 200,000
Notes Receivable 200,000
#
Unearned Interest Income 30,000
Interest Income 30,000
Supporting Computations:

Year Notes Receivable Percentage Interest Income

2023 600,000.00 50.00% 30,000.00
2024 400,000.00 33.33% 20,000.00
2025 200,000.00 16.67% 10,000.00
1,200,000.00 60,000.00

Problem 6-3: INNOVA COMPANY

01/01 Cash 100,000
Notes Receivable 900,000
Sales 820,540
Unearned Interest Income 179,460
#
12/31 Cash 300,000
Notes Receivable 300,000
#
Unearned Interest Income 86,465
Interest Income 86,465
Supporting Computations:

Face Value 900,000.00

Present Value (300,000 * 2.4018) 720,540.00
Unearned Interest Income 179,460.00

Present Value 720,540.00

Cash Received 100,000.00
Sales Price 820,540.00
Cost of Generator 700,000.00
Gross Income 120,540.00

12.00%
Date Collection Interest Principal Present Value
01/01/2023 720,540.00
12/31/2023 300,000.00 86,465.00 213,535.00 507,005.00
12/31/2024 300,000.00 60,841.00 239,159.00 267,846.00
12/31/2025 300,000.00 32,154.00 267,846.00 0.00
Problem 6-6: EMMA COMPANY
01/01 Notes Receivable 6,000,000
Accumulated Depreciation 1,600,000
Loss on Sale of Equipment 292,200
Equipment 6,400,000
Unearned Interest Income 1,492,200
#
12/31 Unearned Interest Income 450,780
Interest Income 450,780
Supporting Computations:

Face Value 6,000,000.00

Present Value (6,000,000 * 0.7513) 4,507,800.00
Unearned Interest Income 1,492,200.00

Sales Price (Present Value) 4,507,800.00

Carrying Amount of Equipment 4,800,000.00
Loss on Sale of Equipment (292,200.00)

10.00%
Date Interest Income Unearned Income Present Value
01/01/2023 1,492,200.00 4,507,800.00
12/31/2023 450,780.00 1,041,420.00 4,958,580.00
12/31/2024 495,858.00 545,562.00 5,454,438.00
12/31/2025 545,562.00 0.00 6,000,000.00

Problem 6-7: DENMARK COMPANY

Requirement 1:
Solid Company
05/01 Cash 3,175,000
Notes Receivable 2,500,000
Interest Income 225,000
(7,500,000 * 9% * 4/12)
Accrued Interest Receivable 450,000
(7,500,000 * 9% * 8/12)
#
12/31 Accrued Interest Receivable 300,000
(5,000,000 * 9% * 8/12)
Interest Income 300,000
Officer
12/31 Cash (2,000,000 * 8%) 160,000
Interest Income 160,000
Boom Company
07/01 Cash 1,200,000
Notes Receivable 2,800,000
Land 3,000,000
Gain on Sale of Land 1,000,000
#
 12/31 Accrued Interest Receivable 140,000
(2,800,000 * 10% * 6/12)
Interest Income 140,000
Requirement 2:

Solid Company
Notes Receivable from Sale of Idle Building (Due 05/01/2024) 2,500,000.00
Accrued Interest Receivable (05/01/2023 - 12/31/2023) 300,000.00 2,800,000.00
Boom Company
Notes Receivable from Sale of Land (Due 07/01/2024) - Principal 600,000.00
[880,000 - (2,800,000 * 10%)]
Accrued Interest Receivable (07/01/2023 - 12/31/2023) 140,000.00 740,000.00
Total Notes Receivable - Current Portion 3,540,000.00

Requirement 3:

Solid Company
Notes Receivable from Sale of Idle Building (Due 05/01/2025) 2,500,000.00
Officer
Notes Receivable from Officer (Due 12/31/2025) 2,000,000.00
Boom Company
Notes Receivable from Sale of Land (Noncurrent Principal) 2,200,000.00
Total Notes Receivable - Noncurrent Portion 6,700,000.00

Chapter 7: Loan Receivable

Problem 7-1: NATIONAL BANK
2023
01/01 Loan Receivable 4,000,000
Cash 4,000,000
#
Cash 342,100
Unearned Interest Income 342,100
#
Unearned Interest Income 150,000
Cash 150,000
#
12/31 Cash 400,000
Interest Income ` 400,000
#
Unearned Interest Income 56,948
Interest Income 56,948
#
2024
12/31 Cash 400,000
Interest Income 400,000
 #
Unearned Interest Income 63,782
Interest Income 63,782
#
2025
12/31 Cash 400,000
Interest Income 400,000
#
Unearned Interest Income 71,370
Interest Income 71,370
#
Cash 4,000,000
Loan Receivable 4,000,000
Supporting Computations:

10.00% 12.00%
Year Interest Received Interest Income Amortization Carrying Amount
01/01/2023 3,807,900.00
12/31/2023 400,000.00 456,948.00 56,948.00 3,864,848.00
12/31/2024 400,000.00 463,782.00 63,782.00 3,928,630.00
12/31/2025 400,000.00 471,370.00 71,370.00 4,000,000.00

Problem 7-4: COZY BANK

Requirement 1:

12/31/2025 (500,000 * 0.8929) 446,450.00

12/31/2026 (1,000,000 * 0.7972) 797,200.00
12/31/2027 (2,000,000 * 0.7118 1,423,600.00
12/31/2028 (4,000,000 * 0.6355) 2,542,000.00
Total Present Value of Loan - 12/31/2024 5,209,250.00

Requirement 2:

Loan Receivable 7,500,000.00

Accrued Interest Receivable for 2024 (7,500,000 * 12%) 900,000.00
Total Carrying Amount - 12/31/2024 8,400,000.00
Present Value of Loan - 12/31/2024 5,209,250.00
Impairment Loss 3,190,750.00

Requirement 3:
2024
Impairment Loss 3,190,750
Accrued Interest Receivable 900,000
Allowance for Loan Impairment 2,290,750
#
2025
 Cash 500,000
Loan Receivable 500,000
#
Allowance for Loan Impairment (5,209,250 * 12%) 625.110
Interest Income 625,110
#
2026
Cash 1,000,000
Loan Receivable 1,000,000
#
Allowance for Loan Impairment 640,123
Interest Income 640,123
Supporting Computations:

12.00%
Year Cash Flow Amortization Allowance for Imp. Carrying Amount
12/31/2024 2,290,750.00 5,209,250.00
12/31/2025 500,000.00 625,110.00 1,665,640.00 5,334,360.00
12/31/2026 1,000,000.00 640,123.00 1,025,517.00 4,974,483.00
12/31/2027 2,000,000.00 596,938.00 428,579.00 3,571,421.00
12/31/2028 4,000,000.00 428,579.00 0.00 0.00

Problem 7-8: WORLD BANK

Requirement 1:
Impairment Loss, 01/01/2023 (2,500,000 * 2%) = 50,000
Requirement 2:

Required Allowance for Loan Impairment, 12/31/2023 (2,100,000 * 15%) 315,000.00

Allowance for Loan Impairment, 01/01/2023 50,000.00
Additional Impairment Loss, 12/31/2023 265,000.00

Requirement 3:

Required Allowance for Loan Impairment, 12/31/2024 (1,500,000 * 1%) 15,000.00

Allowance for Loan Impairment, 12/31/2023 315,000.00
Gain on Reversal of Impairment Loss, 12/31/2024 (300,000.00)

Requirement 4:
2023
01/01 Loan Receivable 6,000,000
Cash 6,000,000
#
 Impairment Loss 50,000
Allowance for Loan Impairment 50,000
#
12/31 Cash (6,000,000 * 10%) 600,000
Interest Income 600,000
#
Impairment Loss 265,000
Allowance for Loan Impairment 265,000
#
2024
12/31 Cash 600,000
Interest Income 600,000
#
Allowance for Loan Impairment 300,000
Gain on Reversal of Impairment Loss 300,000
#
2025
12/31 Accrued Interest Receivable 600,000
Interest Income 600,000
#
Cash 5,400,000
Allowance for Impairment Loss 15,000
Loss from Default 1,185,000
Loan Receivable 6,000,000
Accrued Interest Receivable 600,000
Supporting Computations:

Loan Receivable - Principal 6,000,000.00

Accrues Interest Receivable for 2025 600,000.00
Allowance for Loan Impairment, 12/31/2024 (15,000.00)
Carrying Amount, 12/31/2025 6,585,000.00
Final Collection in 2025 (5,400,000.00)
Loss from Default 1,185,000.00