Problem 4

Pizza Corporation reported the following information on its balance sheet dated December 2019:
Accounts Receivable P4,403,000
Less: Allowance for Doubtful Accounts 291,000
P4,694,000
The following events occurred during 2020:
1. Made credit sales of P18,600,000 and cash sales of P4,480,000.

2. Collected P18,414,000 from customers on account.
3. Wrote off 264,000 of accounts considered to be uncollectible
4. Collected P42,000 from customers whose accounts had been written off as uncollectible.
5. Estimated that 5% of the accounts receivable balance at year-end would prove to be uncollectible.
Instructions: Compute for the following:
1. Accounts Receivable balance as of December 31, 2020.

2. Allowance for Doubtful Accounts balance as of December 31, 2020.
3. Doubtful Accounts Expense for the year ended December 31, 2020.
Solution:
1. Accounts Receivable balance as of December 31, 2020
Beginning balance P 4,403,000

Add: Sales 18,600,000
Less: Collection 18,414,000
Write off 264,000
Ending Balance P 4,325,000
2. Allowance for Doubtful Accounts 291,000

Less: Uncollectible accounts 264,000
Total: 27,000
=
3. Less: 5% of the accounts receivable balance

At the year-end (4,325,000 * 5%) 216,250
189,250
Problem 4
The balance sheet of Shakey’s Company shows the accounts receivable balance at December 31, 2019 as follows
Accounts Receivable – trade P850,000

Allowance for Doubtful Accounts 8,000

P842,000
During 2020, transactions relating to the accounts were as follows:
1. Sales on account, P10,000,000

2. Cash received from collection of accounts receivable totaled P8,820,000 after discounts of P180,000 were
allowed for prompt payment.
3. Customers’ accounts of P50,000 were ascertained worthless and written off,
4. Bad accounts previously written off prior to 2012 amounting to P20,000 were recovered.
5. Received a 90-day, 12% note for P60,000 from a customer on an overdue account.
6. Accounts receivable of P1,400,000 have been pledged to a local bank on a loan of P800,000. Collections
of P300,000 were made on these receivables (not included in the collections previously given) and applied as
partial payment to the loan.
7. The company estimates doubtful accounts at 3% of accounts receivable.
Instructions: Prepare journal entries to record the foregoing transactions. After preparing the journal entries,
determine the amortized cost of the accounts receivable at December 31, 2020.a
JOURNAL ENTRIES DEBIT CREDIT

1.Accounts Receivable P 10,000,000
Sales P 10,000,000
To record sales
2.Cash 8,820,000
Sales Discount 180,000
Accounts Receivable 9,000,000
To record collection of accounts receivable
3. Allowance for Doubtful Accounts 50,000

Accounts Receivable 50,000
To record write off of accounts receivable
4. Accounts Receivable 5,000 20,000

Allowance for doubtful accounts 5,000
To record recovery of accounts receivable
Cash 5,000
Accounts receivable 5,000
4. Accounts Receivable
Allowance for Doubtful Account 20,000
Accounts Receivable Accounts Receivable 20,000

5,000
Allowance for doubtful accounts 5,000
Cash 5,000
Cash
To record collection of accounts receivables
5. Notes Receivable 60,000

To record notes receivable
6. Cash 800,000
Loans Payable 800,000
To record bank loan
Cash 300,000
Loans Payable bank 300,000

Cash 300,000
To record partial payment to the bank loan
7.Bad Debt Expense 74,200

Allowance for Doubtful Accounts 74,200
Solution for Entry No.7
Account Receivable Dec. 31, 2019 850,000

Add :Sales on Account 10,000,000
Less: Collection with sales discount of 180,000 9,000,000
Written Off 50,000
Note Receive in payment in account 60,000
Payment of loan payable in the collection of Accounts Receivable 300,0000
Accounts Receivable Outstanding Dec. 31, 2020 1,740,000
Allowance For Doubtful Accounts Beginning 8,000

Less: Written Off 50,000
Add: Recovery 20,000
Allowance for Doubtful accounts -22,000
Add: Allowance for Doubtful Accounts ending 52,200
Bad Debt Expense Dec. 31, 2020 74,200
EQUIREMENT 2: Determine
the amortized cost of accounts
receivable
Accounts Receivable P
995,000
Less: Allowance of Doubtful
accounts 59,000
Amortized cost of Accounts
Receivable P 936,00
receivable
995,000
accounts 59,000
Receivable P 936,00
receivable
995,000
accounts 59,000
Receivable P 936,00
Requirement 2
Accounts Receivable 1,740,000

Less: Allowance for Doubtful Accounts 52,200
Amortized cost of Accounts Receivable 1,687,800

Problem 4

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1. Made credit sales of P18,600,000 and cash sales of P4,480,000.

Instructions: Compute for the following:

1. Accounts Receivable balance as of December 31, 2020.

1. Accounts Receivable balance as of December 31, 2020

Beginning balance P 4,403,000

2. Allowance for Doubtful Accounts 291,000

3. Less: 5% of the accounts receivable balance

Accounts Receivable – trade P850,000

1. Sales on account, P10,000,000

JOURNAL ENTRIES DEBIT CREDIT

3. Allowance for Doubtful Accounts 50,000

4. Accounts Receivable 5,000 20,000

Accounts Receivable Accounts Receivable 20,000

5. Notes Receivable 60,000

Loans Payable bank 300,000

7.Bad Debt Expense 74,200

Solution for Entry No.7

Account Receivable Dec. 31, 2019 850,000

Allowance For Doubtful Accounts Beginning 8,000

Accounts Receivable 1,740,000

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