Problem 2: Star Box Company produces paint and related products for sale to the construction industry throughout Metro Manila. While sales have remained relatively stable despite a decline in the amount of new construction, there has been a noticeable change in the timeliness with which the company's customers are paying their bills. Page 1 of 6 company sells its products on payment terms of 2/10 n/30. In the past, over 75% of the credit customers have taken advantage of the discount by paying within 10 days of the invoice date. During the year ended December 31, 2015, the number of customers taking the full 30 days to pay has increased. Current indications are that less than 60% of the customers are now taking the discount. Uncollectible accounts as a percentage of total credit sales have risen from the 1.5% provided in the past years to 4% in the current year. In response to your request for more information on the deterioration of accounts receivable collections, the company's controller has prepared the following report: Star Box Company Accounts Receivable Collections December 31, 2015 The fact that some credit accounts will prove uncollectible is normal and annual bad debt write-offs had been 1.5% of total credit sales for many years. However, during the year 2015, this percentage increased to 4%. The accounts receivable balance is P 1,500,000, and the condition of this balance in terms of age and probability of collection is shown below: 20 354 80.0% 65.0% 3.100 Proportion to total: Age of accounts: Probability of collection: 64% 9600DV 1 - 10 days 1 99.0%) tu 18% 271,00 11 - 30 days 25% 97.5% 8% 20.07 31-60 days past due S 95.0% w 5% 1,000 61-120 days past due 3% 95,UDD 121 - 180 days past due 2% 30,0) Over 180 days past due $0 20.0% AIR 1.510.000 Art. 71,100 At the beginning of 2015, the Allowance for Bad debts account had a credit balance of P 27,300. The company has provided for a monthly bad debt expense accrual during the year based on the assumption that 4% of total credit sales will be uncollectible. Total credit sales for the vear 2015 amounted to P 8,000,000, and write-offs of uncollectible accounts during the year totaled P 292,500. 3. How much is the additional bad debts expense recognized on December 31, 20157 4. What is the Net realizable value of the accounts receivable on December 31, 2015? Waa90 Problem 3: On January 1, 2015, Pink Guy Company sold land that originally cost P 400,000 to Blue Berry Company. As payment, Blue Berry gave Pink Guy a P 600,000 note. The note bears an interest rate of 4% and is to be repaid in annual installments of P 200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2015. The market price of the land is not reliably determinable. The prevailing rate of interest for note of this type is 14% on January 1, 2015 and 17% on December 31, 2015. Pink Guy made the following entries in relation to the sale of land and the related note receivable: Page 2 of 6 Problem 2: Star Box Company produces paint and related products for sale to the construction industry throughout Metro Manila. While sales have remained relatively stable despite a decline in the amount of new construction, there has been a noticeable change in the timeliness with which the company's customers are paying their bills. Page 1 of 6 company sells its products on payment terms of 2/10 n/30. In the past, over 75% of the credit customers have taken advantage of the discount by paying within 10 days of the invoice date. During the year ended December 31, 2015, the number of customers taking the full 30 days to pay has increased. Current indications are that less than 60% of the customers are now taking the discount. Uncollectible accounts as a percentage of total credit sales have risen from the 1.5% provided in the past years to 4% in the current year. In response to your request for more information on the deterioration of accounts receivable collections, the company's controller has prepared the following report: Star Box Company Accounts Receivable Collections December 31, 2015 The fact that some credit accounts will prove uncollectible is normal and annual bad debt write-offs had been 1.5% of total credit sales for many years. However, during the year 2015, this percentage increased to 4%. The accounts receivable balance is P 1,500,000, and the condition of this balance in terms of age and probability of collection is shown below: 20 354 80.0% 65.0% 3.100 Proportion to total: Age of accounts: Probability of collection: 64% 9600DV 1 - 10 days 1 99.0%) tu 18% 271,00 11 - 30 days 25% 97.5% 8% 20.07 31-60 days past due S 95.0% w 5% 1,000 61-120 days past due 3% 95,UDD 121 - 180 days past due 2% 30,0) Over 180 days past due $0 20.0% AIR 1.510.000 Art. 71,100 At the beginning of 2015, the Allowance for Bad debts account had a credit balance of P 27,300. The company has provided for a monthly bad debt expense accrual during the year based on the assumption that 4% of total credit sales will be uncollectible. Total credit sales for the vear 2015 amounted to P 8,000,000, and write-offs of uncollectible accounts during the year totaled P 292,500. 3. How much is the additional bad debts expense recognized on December 31, 20157 4. What is the Net realizable value of the accounts receivable on December 31, 2015? Waa90 Problem 3: On January 1, 2015, Pink Guy Company sold land that originally cost P 400,000 to Blue Berry Company. As payment, Blue Berry gave Pink Guy a P 600,000 note. The note bears an interest rate of 4% and is to be repaid in annual installments of P 200,000 plus interest on the outstanding balance. The first payment is due on December 31, 2015. The market price of the land is not reliably determinable. The prevailing rate of interest for note of this type is 14% on January 1, 2015 and 17% on December 31, 2015. Pink Guy made the following entries in relation to the sale of land and the related note receivable: Page 2 of 6