II. Audit of Receivables 1.
Compos Compositi ition on of trade trade and and other other receiva receivable bles s
On Deember 3, 2015 the accounts receivable control account of Ipil Co. had a balance of P10,000. !n anal"sis of _____________________ the accounts receivable account _________________________ _____________ _________________________ ________ sho#ed the follo#in$% _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ !cco _________________________ u n t s n o # n t o b e # o r t h l e s s P hP 2,500 ______________________________________ _____________________ ________ !dvance pa"ments to creditors on purhase orders 10,000 _________________________ ______________________________________ _____________________ ________ !dvances to affiliated companies 25000 _________________________ _____________ _________________________ ________ Customer7s accounts reportin$ credit balane_____________________ arisin$ from sales return 815,0009 _________________________ ______________________________________ _____________________ ________ Interest receivable on bonds 10000 _________________________ _____________ _________________________ _____________________ ________ Other trade accounts receivable ) unassi$ned 50000 _________________________ _____________ _____________________ ________ ubsription receivable for_________________________ ordinar" share capital due in 30 da"s 55000 _________________________ ______________________________________ _____________________ ________ &rade accounts receivable ) assi$ned 15000 _________________________ _____________ _________________________ _____________________ ________ &rade installment receivable due 1)1 months includin$ unea rned finances char$e s, P2000 22000 _________________________ _____________ _________________________ _____________________ ________ &rade receivables from officers, due currentl" 1500 _________________________ ______________________________________ _____________________ ________ &rade accounts on #hich post)dated checs are held 8no _____________ ________ entr _________________________ ies #ere made on rec_________________________ eipts of checs9 _____________________ 5000 &ota _________________________ l Ph________ P 11,000 _____________ _________________________ _____________________ Required: _________________________ ______________________________________ _____________________ ________ _________________________ _____________ _________________________ ________ 1. &rade &rade and other other recei receivables vables to be_____________________ repor reported ted on the entit"' entit"'s s Dec. 31, 2015 statement of financial position. _________________________ _____________ _________________________ _____________________ ________ _________________________ _____________ _________________________ _____________________ ________ Answer: _________________________ ______________________________________ _____________________ ________ _________________________ _____________ _____________________ ________ (on)trade receivab_________________________ les PhP *5,000 _________________________ _____________ _____________________ ________ &rade receivables _________________________ +1,500 _________________________ ______________________________________ _____________________ ________ &rade and other receivables PhP 1,500 _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________ _________________________ ______________________________________ _____________________ ________
2.
Comput Computati ation on of adju adjust sted ed accou accounts nts rece receivab ivable le
In the audit of -eatles Compan", the auditor had an appreciation of the follo#in$ schedule and noted some comments for possible adustments% Beatles Compan Accounts Receivable !chedule "ec. #1$ 2%1&
Customer
/ove Do tra#berr" ield &his -o" Comp. 4irl Corp. &icet to 6ide &ransport Corp.
1
Balance
PhP +2,000.00
Current
PhP
'ast "ue
)
PhP
+2,000.00 +2
20,000
2,000
1*2,000
350,000
+2,000
25,000
3*,000
212,000
12,000
10,000
)
10,000
II. Audit of Receivables
/et It -e Corp. :e" ;ude 4et -ac Comp.
12,000
0,000
,000
,000
,000
)
25,000
0,000
1*,000
20,000
20,000 ) PhP+3,000.0 &otals PhP 2,020,000.00 PhP 1,0,000.00 0 _____________________________________________
_____________________________________________ &he !ccounts 6eceivable control account balance #as determined to be _____________________________________________ P2,020,000. _____________________________________________ &he e=ternal auditor submitted the follo#in$ audit comments for ossible _____________________________________________ adustments% _____________________________________________ /ove Do erchandise found defective> returned b" customer on _____________________________________________ Oct. 31, 2015 for credit, but the credit memo #as issued b" -eatles on ;an. 15, 201. _____________________________________________ _____________________________________________ tra#berr" !ccount is $ood but usuall" pa"s late. _____________________________________________ ield _____________________________________________ &his -o" Comp. erchandise #orth P10,000 #as destro"ed #hile in transit on a" 31, 2015, terms O- Destination. &he _____________________________________________ carrier #as billed on ;une 15, 2015. 8ee &iet to 6ide _____________________________________________ Corp. !nd
#.
Audit of accounts receivable and related accounts
In connection #ith the audit of the financial statements of Pratis Corporation, "our audit senior instructed "ou to e=amine the compan"'s accounts receivable. Prior to an" adustments "ou #ere able to e=tract the follo#in$ balances from Pratis' trial balance as of December 31, 2015% !ccounts receivable !llo#ance for doubtful accounts
PhP
2,500 15,000
rom the schedule of accounts receivables as of December 31, 2015, "ou determined that this account includes the follo#in$% !ccount #ith debit balances% 0 da"s old @ belo# 1 to +0 da"s Over +0 da"s !dvances to officers !ccount #ith credit balances !ccounts receivable per 4/
PhP PhP
23,500 11*,200 5,00
PhP 1,100 1,00 815,0009 PhP 2,500
&he credit balance in customer's account represents collection from a customer #hose account had been #ritten)off as uncollectible in 201. !ccounts receivable for more than a "ear totalin$ P21,000 should be #ritten) off. Confirmation replies received directl" from customers disclosed the follo#in$ e=ceptions% Custome r
2
Customer7s comment
!udit indin$s
II. Audit of Receivables
;essie
&he $oods sold on Dec. 1 #ere returned on Dec. 1, 2015.
&he client failed to record credit memo for no. 23 for P12,000. &he merchandise #as inlcluded in the endin$ inventor" at cost. 6obert Ae do not o#e this amount Investi$ation revealed that 8insert bad #ords9. Ae did not $oods sold for P1,000 #ere receive an" merchandise from shipped to 6obert on Dec. 2+, "our compan". 2015, terms O- shippin$ point. &he $oods #ere lost in transit and the shippin$ compan" has acno#led$e its responsibilit" for the lost of ________________________________________________ the merchandise. !nne I am entitled to a 10B !nne is an emplo"ee of ________________________________________________ emplo"ee discount.
________________________________________________ 0B da"s old and belo# 1B ________________________________________________ 1 to +0 da"s 2B ________________________________________________ Over +0 da"s 5B ________________________________________________ Required: ________________________________________________ 1. Compute for the adusted balances of follo#in$ ________________________________________________ a. !ccounts receivable P3*,00 b. !llo#ance for doubtful accounts *,22 ________________________________________________ 2. !dustin$ entries as of Dec. 31, 2015 ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________
over *5B of the credit customers have taen advanta$e of the disount b" pa"in$ #ithin 10 da"s of the invoie date. Durin$ the "ear ended Dec. 31, 2015, the number of customers tain$ the full 30 da"s to pa" has increased. Current indications are that less than 0B of the customers are no# tain$ the discount. Encollectible account as a percenta$e of total credit sales have risen from 1.5B provided in the past "ears to B in the current "ear. In response to "our reFuest for more nformation on the deterioration of accounts receivable collections, the compan"'s controller has prepared the follo#in$ report% Professional Compan" !ccounts 6eceivable Collections Dec. 31, 2015
&he fact that some credit accounts #ill prove uncollectible is normal, and annual bad debt #rite)offs had been 1.5B of total credit sales for man" "ears. :o#ever, durin$ the "ear 2015, this percenta$e increased to B. &he accounts receivable balance is P1,500,000, and the condition of this balance in terms of a$e and probabilit" of collection is sho#n belo#% Proportion to total B 1B B 5B 3B 2B
!$e of accounts
Probabilit" of collections
1 ) 10 da"s 11 ) 30 da"s Past due 31 ) 0 da"s Past due 1 ) 120 da"s Past due 121 ) 10 da"s Past due over 10 da"s
++.0B +*.5B +5.0B 0.0B 5.0B 20.0B
!t the be$nnin$ of the "ear, the !llo#ane for Doubtful !ccounts had a redit balance of P2*,300. &he compan" has provded for a monthl" bad debt e=pense arual durin$ the "ear based on the assumption that B of total credit sales #ill be uncollectible. &otal credit sales for the "ear 2015 amounted to P,000,000, and #rite)offs of uncollectible accounts durin$ the "ear totaled P2+2,500. Required:
3
II. Audit of Receivables
1.
!dusted balane of the allo#ance for doubtful accounts as of Dec. 31, 2015
________________________________________________ 2. &he necessar" adustin$ ournal entr" to adust the allo#ance for ________________________________________________ doubtful accounts as of D ec. 31, 2015. ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ ________________________________________________ 4
II. Audit of Receivables
). Audit of accounts receivable and related accounts In connection #ith "our e=amination of the finacial statements of 6in$o, I nc.
or the "ear ended Dec. 31, 205, "ou #ere able to obtain certain information durin$ "our audit of the accounts receivable and related accounts. •
&he Dec. 31, 2015 balance in the !ccounts 6eceivable control
•
accounts is P3*,+00. !n a$in$ schedule of the accounts receivable as of Dec. 31, 2015 is presented belo#%
!$e 0 da"s @ under
(et debit balance PhP
1 to +0 da"s
3*,00
1B
30*,100
2B
+,00
5B
+1 to 120 da"s Over 120 da"s PhP
Percenta$e to be applied after corretions have been made
53,200 3*,+00
Definitel" uncollectible, P+,000> the remainder is estimated to be 25B uncollectible
&he allo#ance for doubtful accounts schedule is presented belo#%
•
Debit
Credit
;an. 1, 2015 (ov. 30, 2015
-alance PhP 1+,*00
PhP ,100
Dec. 31, 2015
13,00 PhP 1,+5
PhP 55,+5
8P3*,+00 = 5B9
•
Gntries made to doubtful accounts e=pense account #ere% 1. ! debit on Dec. 31 for the amount of the credit to allo#ance for 2.
doubtful accounts. ! credit for P,100 on (ov. 30, 2015, and a debit to allo#ance for doubful accounts because of a banruptc". &he related sales tool
•
place on Oct. 1, 2015. &here is a credit balance in one account receivable 81 to +0 da"s9 of P11,000> it represents an advance on sales contract.
Required:
5
1.
!s of and for the "ear ended Dec. 31, 2015% a. !ccounts receivable b. !llo#ance for doubtful accounts c. Doubtful account e=pense
2.
!dustin$ entries as of Dec. 31, 2015
