Golden Questions

1.
Your audit disclosed that on December 31, 2006, the accounts receivable control account of
UNSAMANINGGOLDENQUESTIONMURAGGOLDENBUZZER COMPANY had a balance of P2,865,000.
An analysis of the accounts receivable account showed the following:
Accounts known to be worthless P 37,500
Advance payments to creditors on purchase orders 150,000
Advances to affiliated companies 375,000
Customers’ accounts reporting credit balances arising from sales return
(225,000)
Interest receivable on bonds 150,000
Other trade accounts receivable – unassigned 750,000
Subscriptions receivable for common stock due in 30 days 825,000
Trade accounts receivable - assigned (Finance company’s equity in assigned
accounts is P150,000) 375,000
Trade installment receivable due 1 – 18 months, including unearned finance
charges of P30,000 330,000
Trade receivables from officers due currently 22,500
Trade accounts on which post-dated checks are held (no entries were made on
receipts of checks) 75,000
P2,865,000

The trade accounts receivable as of December 31, 2006 is

a. P 1,147,500
b. P 1,522,500
c. P 1,485,000
d. P 1,447,500

ANSWER: B

Other trade accounts receivable – unassigned P 750,000

Trade accounts receivable - assigned 375,000
Trade installment receivable due 1 – 18 months, net of
unearned finance charges of P30,000 300,000
Trade receivables from officers due currently 22,500
Trade accounts on which post-dated checks are held 75,000
Trade accounts receivable P1,522,500

2.
THEREGOESMYHEARTBEATING 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

THEREGOESMYHEARTBEATING COMPANY estimates its bad debt expense to be 1 1/2% of net

sales. Determine its bad debt expense for 2006

a. P 225,000
b. P 254,500
c. P 214,500
d. P 55,000
ANSWER: C

Sales P15,000,000
Less sales returns and allowances 700,000
Net sales 14,300,000
Multiply by bad debt rate 1 1/2%
Bad debt expense P 214,500

3.
MANANAJUDHAYSALAMAT COMPANY provides for doubtful accounts based 3% of credit sales.
The following data are available for 2006.

Credit sales during 2006 P21,000,000

Allowance for doubtful accounts 1/1/06 170,000
Collection of accounts written off in prior years (Customer credit
was reestablished) 80,000
Customer accounts written off as uncollectible during 2006 300,000

What is the balance in allowance for doubtful accounts at December 31, 2006?

a. P 630,000
b. P 420,000
c. P 500,000
d. P 580,000

ANSWER: D

Allowance for doubtful accounts 1/1/06 P170,000

Establishment of accounts written off in prior 80,000
years
Customer accounts written off in 2006 (300,000)
Bad debt expense for 2006 (P21,000,000 X 3%) 630,000
Allowance for doubtful accounts 12/31/06 P580,000