Audit of Accounts Receivable and Related Accounts1

Audit of accounts receivable and related accounts
In connection with the audit of the financial statements of Praktis Corporartion, your audit senior
instructed you to examine the company’s accounts receivable.
Prior to any adjustments you were able t extract the following balances from Praktis’ trial
balance as of December 31, 2015:
Accounts receivable P442,500
Allowance for doubtful accounts 15,000
From the schedule of accounts receivable as of December 31, 2015, you determined that this
account includes the following:
Accounts with debit balances:
60 days old and below P 238,500
61 to 90 days 117,200
Over 90 days 85,400 P 441,100
Advances to officers 16,400
Accounts with credit balance (15,000)
Accounts receivable per GL P 442,500
The credit balance in customer’s account represents collection from a customer whose account
had been written-off as uncollectible in 2014.
Accounts receivable for more than a year totaling P21,000 should be written off.
Confirmation replies received directly from customers disclosed the following exceptions:
Customer Customer’s Comments Audit Findings

Jessie The goods sold on December 1 The client failed to record credit
were returned on December 16, memo no. 23 for P12,000. The
2015. merchandise was included in the
ending inventory at cost.
Robert We do not owe this amount *%#@ Investigation revealed that goods
(bad word). We did not receive any sold for P16,000 were shipped to
merchandise form your company. Robert on December 29, 2015,
terms FOB shipping point. The
goods were lost in transit and the
shipping company has
acknowledged its responsibility for
the loss of merchandise.
Anne I am entitled to a 10% employee Anne is an employee of Praktis.
discount. Your bill should be Starting November 2015, all
reduced by P1,200. company employees were entitled
to a special discount.
Jay-ar We have not yet sold the goods. Merchandise billed for P18,000
We will remit the proceeds as soon were consigned to Jay-ar on
as the goods are sold. December 30, 2015. The goods
cost P13,000.
Roy We do not owe you P20,000. The sale of merchandise on
We already paid our accounts as December 18, 2015 was paid by
evidenced by OR # 1234. Roy on January 6, 2016.
Carla Reduce your bill by P1,500 This amount represents freight paid
by the customer for the
merchandise shipped on December
17, 2015, terms, FOB destination-
collect.
Based on your discussion with Praktis’ Credit Manager, you both agreed that an allowance for
doubtful accounts should be maintained using the following rates:
60 days old and below 1%
61 to 90 days 2%
Over 90 days 5%
REQUIRED:
1. Compute for the adjusted balances of the following:

a. Accounts receivable P387,400
b. Allowance for doubtful accounts P 7,622
2. Adjusting entries as of December 31, 2015
SOLUTION:
Per Adjustmen
Books ts Per Audit
442,5 (16,4 387,4
Accounts receivable 00 1 00) 00
15,0
2 00
(21,0
3 00)
(12,0
4 00)
(1,2
5 00)
(18,0
6 00)
(1,5
7 00)
238,5 (12,0 205,8

60 days old and below 00 4 00) 00
(1,2
5 00)
(18,0
6 00)
(1,5
7 00)
117,2 117,2
61 to 90 days 00 00
85,4 (21,0 64,4
Over 90 days 00 3 00) 00
15,0 15,0 7,6

Allowance for doubtful accounts 00 2 00 22
(21,0
3 00)
(1,3
8 78)
Adjusting Journal Entries
16,4
1 Advances to officers and employees 00
16,4
Accounts receivable 00
15,0
2 Accounts receivable 00
15,0
Allowance for doubtful accounts 00
Erroneous recording of recovery from written off
account
21,0
3 Allowance for doubtful accounts 00
21,0
Accounts receivable (>90 days) 00
Accounts that should be written off
12,0
4 Net sales 00
12,0
Accounts receivable (<60 days) 00
Unrecorded credit memo
1,2
5 Net sales 00
1,2
Unrecorded employee discount
18,0
6 Net sales 00
18,0
13,0
Inventory 00
13,0
Cost of sales 00
Goods out on consignment erroneously
billed
1,5
7 Freight out 00
1,5
Unrecorded freight-out
1,3
8 Allowance for doubtful accounts 78
1,3
Doubtful accounts expense 78
205,8 1 2,0
60 days old and below 00 % 58
117,2 2 2,3
61 to 90 days 00 % 44
64,4 5 3,2
Over 90 days 00 % 20
7,6
Required allowance 22
Balance per books before this adjustment (15,000+15,000- 9,0
21,000) 00
1,3
Adjustment 78

Audit of Accounts Receivable and Related Accounts1

Uploaded by

Copyright:

Available Formats

Audit of Accounts Receivable and Related Accounts1

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Audit of Accounts Receivable and Related Accounts1

Uploaded by

Copyright:

Available Formats

Audit of accounts receivable and related accounts

Accounts receivable P442,500

Allowance for doubtful accounts 15,000

Accounts with debit balances:

60 days old and below P 238,500

Over 90 days 85,400 P 441,100

Advances to officers 16,400

Accounts with credit balance (15,000)

Accounts receivable per GL P 442,500

Customer Customer’s Comments Audit Findings

60 days old and below 1%

1. Compute for the adjusted balances of the following:

238,5 (12,0 205,8

15,0 15,0 7,6

You might also like