Receivables

Question 1

TRADE RECEIVABLES
- to be realized within normal operating cycle or 1 year, whichever is SHORTER. True or False?

Answer 1

False, LONGER

Question 2

Current or Non Current
- Advances to Shareholders
- Advances to Supplier

Answer 2

• Non Current
• Current

Question 3

Current or Non Current
- Advances to Director
- Advances to Employee

Answer 3

• Non Current
• Current

Question 4

Allowance for Freight is only possible when??

Answer 4

FOB destination, freight collect
- dapat si seller magbayad, pero si buyer nagbayad → ibawas sa AR

Question 5

ACCOUNTING FOR CASH DISCOUNTS
- basis → ??
- gross method and net method

NOTE : Freight → increase in AR → don’t’ apply cash discount

Answer 5

Invoice Price

Question 6

T-account of AR

Where to put “recovery of AR written off”?

Answer 6

Dr. Beginning
Dr. Credit Sales

Cr. Collections
Cr. Write Off
Cr. Sales Discount, Returns…

pag nag write off → Dr. ADA // Cr. AR
pag nirecover
- Dr. AR // Cr. ADA
- Dr. Cash // Cr. AR (thus, nagcancel out lang)

Question 7

T-account of ADA

Where to put “recovery of AR written off”?

Answer 7

Dr. Write Off

Cr. Beginning
Cr. Bad Debt Expense
Cr. Recovery

pag nag write off → Dr. ADA // Cr. AR
pag nirecover → Dr. AR // Cr. ADA

Question 8

Balance Sheet Method (percentage of AR or Aging of AR) → ending balance of ADA

Income Statement Method → bad debt expense

Answer 8

YES

Question 9

DISHONORED NOTES
- from Notes Receivable → AR (face amount + interest)

Answer 9

YES

Question 10

How to compute Interest Income
- short term
- long term - interest bearing
- long term - non interest bearing

Answer 10

short term
- FA x Nominal %

long term - interest bearing
- FA x Nominal %

long term - non interest bearing
- CA x Effective %

Question 11

What is the journal entry for pledge? for assignment?

What is the disclosure for pledge? for assignment?

Answer 11

Journal Entry
- pledge - none
- assignment - AR → AR - assigned

Disclosure
- pledge - yes
- assignment - equity on assigned accounts

tayo si assignor

Question 12

How to solve equity on assigned accounts?

Answer 12

Accounting Equation
- AR (CA) less Loan Payable (Balance) = Equity on AA

NOTE : Payment to Loan = apply muna sa interest bago sa principal

Question 13

FACTORING

WITHOUT RECOURSE
- AR is derecognized (outright sale)

WITH RECOURSE
- AR is not derecognized (substance : borrowing)

How to solve Selling Price?
How to solve Proceeds?
How to solve Gain/Loss?

Treatment for Recourse Liability

Answer 13

Face Value of AR
Less : Other Charges
Selling Price
Less : Factor’s Holdback (AR from factor)
Proceeds

Selling Price
Less : CA of AR
Gain/Loss

Recourse Liability → additional loss (only if not all are collected)

Question 14

DISCOUNTING

WITHOUT RECOURSE
- NR is derecognized (no liability)
- credit → ??

WITH RECOURSE - CONDITIONAL SALE
- NR is derecognized (contingent liability)
- credit → ??

WITH RECOURSE - SECURED BORROWING
- NR is not derecognized
- credit → ??

Answer 14

• NR
• NR - discounted
• liability (equal to face of NR)

Question 15

DISCOUNTING

How to solve Net Proceeds?
How to solve Gain/Loss?

Answer 15

Maturity Value (Principal + Interest)
Less : Discount (MV x Discount % x Unexpired Term)
Net Proceeds
Less : CA (include Accrued Interest)
Gain/Loss

NOTE : Gain/Loss → Without Recourse & Conditional Sale
NOTE : Interest Income/Expense → Secured Borrowing