AUDIT OF RECEIVABLES
Problem 1
The accounts receivable of JACK N JILL COMPANY were stated at P1,467,000 in
a balance sheet submitted to a banker for credit. You are called upon to audit
the report and, upon analysis, the asset was found to consist of the following
items:
Due from customers on open account P 1,125,000
Acknowledged claim for damages 22,500
Due from consignee at billed price – cost price being P22,500 30,000
Investment in and advances to affiliated company 150,000
Loans to officers and employees 13,500
Deposits with municipalities – bids for contracts 67,500
Unpaid capital stock subscriptions 60,000
Advances to creditors for merchandise purchase but not received 24,000
Cash advanced to salesmen for traveling expenses 4,500
Allowance for doubtful accounts (30,000)
P1,467,000
The amount of P1,125,000 due from customers was the remaining balance after
deducting accounts with credit balances of P6,000.
During your examination, you noted that on December 31, the company assigned
P300,000 of customers’ accounts to secure a 17%, P240,000 note payable. A 1%
commission based on the accounts assigned was charged and deducted from
the cash received. The client recorded this transaction by a debit to cash and a
credit to notes payable.
Questions
1. How much is the Accounts Receivable (gross) balance at December 31?
a. P 759,000 b. P 789,000 c. P 1,101,000 d. P 1,131,000
2. The total current non-trade receivable balance at December 31 is:
a. P 64,500 b. P 96,000 c. P 120,000 d. P 192,000
3. The liability for the accounts receivable – assigned is:
a. P 237,000 b. P 240,000 c. P 243,000 d. P 300,000
4. The total non-trade receivable balance at December 31 is:
a. P 342,000 b. P 318,000 c. P 313,500 d. P 245,000
