Topic: Audit of Receivables

Requirements:

1. Accrued interest receivable on December 31, 2021

2. Carrying value on December 31, 2021, of the zero-interest-bearing note from sale of patent.

3. Interest income for the year ended December 31, 2021.

4. Current portion of long-term receivables on December 31, 2021

5. Total long-term receivables on December 31, 2021.

PROBLEM NO. 2 The following information is based on a first audit of SABILA COMPANY. The client has not prepared financial statements for 2019, 2020, or 2021. During these years, no accounts have been written off as uncollectible, and the rate of gross income on sales has remained constant for each of the three years. Prior to January 1, 2019, the client used the accrual method of accounting. From January 1, 2019, to December 31, 2021, only cash receipts and disbursements records were maintained. When sales on account were made, they were entered in the subsidiary accounts receivable ledger. No general ledger postings have been made since December 31, 2018. As a result of your examination, the correct data shown in the table below are available: 12/31/18 12/31/21 Accounts receivable balances: Less than one year old P15,400 P28,200 One to two years old 1,200 1,800 Two to three years old 800 Over three years old 2,200 Total accounts receivable P16,600 P33,000 Inventories Accounts payable for inventory purchased P11,600 P5.000 P18,800 P11.000 2019 2020 2021 Cash received on accounts receivable in: Applied to: Current year collections Accounts of the prior year Accounts of two years prior Total P148,800 13,400 600 P162.800 P161,800 15,000 400 P177,200 P208,800 16,800 2,000 P227,600 Cash sales P17,000 P26,000 P31,200 Cash disbursements for inventory purchased P125.000 P141.200 P173.800 PROBLEM NO. 2 The following information is based on a first audit of SABILA COMPANY. The client has not prepared financial statements for 2019, 2020, or 2021. During these years, no accounts have been written off as uncollectible, and the rate of gross income on sales has remained constant for each of the three years. Prior to January 1, 2019, the client used the accrual method of accounting. From January 1, 2019, to December 31, 2021, only cash receipts and disbursements records were maintained. When sales on account were made, they were entered in the subsidiary accounts receivable ledger. No general ledger postings have been made since December 31, 2018. As a result of your examination, the correct data shown in the table below are available: 12/31/18 12/31/21 Accounts receivable balances: Less than one year old P15,400 P28,200 One to two years old 1,200 1,800 Two to three years old 800 Over three years old 2,200 Total accounts receivable P16,600 P33,000 Inventories Accounts payable for inventory purchased P11,600 P5.000 P18,800 P11.000 2019 2020 2021 Cash received on accounts receivable in: Applied to: Current year collections Accounts of the prior year Accounts of two years prior Total P148,800 13,400 600 P162.800 P161,800 15,000 400 P177,200 P208,800 16,800 2,000 P227,600 Cash sales P17,000 P26,000 P31,200 Cash disbursements for inventory purchased P125.000 P141.200 P173.800