AR Impairment

Marisse wrote on Tue, 30 December 2008 05:57

Oh my Gulay.  Sir! balik ka na dito! Magprof ka na!  *Hindi ko yan matanong sa prof ko eh* haha.. Nagets ko yung sa discounting, salamat ng sobra!  May problem lang po akong itatanong, pasensya na po. Di ko pa rin kasi masagutan ng maayos yung ibang format ng tanong sa impairment  Quote: The balances of selected accounts taken from the December 31, 2008 FS are as follows: Accounts Receivable…………….P 337,000 Allowance for Bad Debts…………12,000 The ff. transactions (in summary) affecting accounts receivable occured during the year ended Dec 31, 2009: Sales (all on credit, terms 2/10, 1/15, n/60)…….P 1,500,500 Cash received from customers From customers paying within the 10-daydiscount period……………….882,000 From customers paying within the 15-daydiscount period……………….495,000 From recovery of accounts written off………3,000 From customers paying beyond discount period……………………………..? Accounts receivable written off as worthless………11,000 Credit memoranda for sales returns………………..6,000 Based on assessment of the collectibility of accounts, impairment loss recognized for A/R is 15,000. Compute: Balance of Accounts receivable and Allowance for Bad debts that would be reported in the Dec 31, 2009 F/S. May sagot po ako kaso, di ako sigurado.. Kinakapa ko pa rin ang A/R related accounts…

tanong lang po, pano turo sa inyo sa entry ng impairment nyo? ginagamit nyo parin ba yung Allowance for Impairment? O sa allowance for bad debts na? kasi nung review namin, bago lang to’ng provision na to sa ifrs. pero na-tackle namin.

saka, sure ka po, complete yung data ng problem? walang total net recoverable amount ng AR?

sabi na eh, kasi di mo macocompute ung total collections. 

ok, let’s proceed to

AR Impairment

The balances of selected accounts taken from the December 31, 2008 FS are as follows:

Accounts Receivable…………….P 337,000
Allowance for Bad Debts…………12,000

The ff. transactions (in summary) affecting accounts receivable occured during the year ended Dec 31, 2009:

Sales (all on credit, terms 2/10, 1/15, n/60)…….P 1,500,500
Cash received from customers………1,600,000
From customers paying within
the 10-daydiscount period……………….882,000
From customers paying within
the 15-daydiscount period……………….495,000
From recovery of accounts written off………3,000
From customers paying beyond
discount period……………………………..?
Accounts receivable written off as worthless………11,000
Credit memoranda for sales returns………………..6,000

Based on assessment of the collectibility of accounts, impairment loss recognized for A/R is 15,000.

Compute:
Balance of Accounts receivable and Allowance for Bad debts that would be reported in the Dec 31, 2009 F/S.

OK. IMPAIRMENT OF AR. Dati, hindi iniimpair ang AR. Bad debts expense lang. Pero ngayon, since ang AR ay financial asset tulad ng ibang financial assets, iniimpair narin sya. Pero papano ginagawa ang computation ng IMPAIRMENT LOSS?

Dalawa lang naman yan eh. It’s either
1. binigay na yung mismong amount ng Impairment loss
2. or ikaw ang magcocompute noon using the net recoverable amount ng AR.

Mas madali kung ibibigay na nila yung mismong impairment loss kasi ipapasok mo lang sya sa ABD. Pero kung hindi, ikaw ang magcocompute. Papano?

AR NET RECOVERABLE AMOUNT:
Dito, hinahati hati yung AR depende sa age nya (parang sa aging) tapos ididiscount sya (ippresent value) at a rate depending on the expected date of collection. Para din syang aging pero in this case, hindi percentage of collectibility ang iapply nyo instead, ippresent value nyo lang yung amounts depending nga sa expected date of collection (paulit ulit sinabi ko no? hehe). Tapos yung macocompute nyong amount, yun yung impaired AR or the Net Recoverable Amount of AR.

Tapos, yung difference nung unimpaired balance ng AR at Impaired balance ng AR ay ang dapat na ending balance ng Allowance for bad debts nyo. Clear?

Para mas malinaw, mamaya ko nalang bibigyan ng example para hindi kayo malito dun sa current problem na sinasagutan natin. Or better yet, magbigay kayo ng problem sa book para hindi na ko mag-iimbento pa ng problem para mas madali kayo makakarelate. So, kung may problem sa book, better, pakipost nalang tapos discuss ko.

Sa problem, given na yung impariment loss mismo so ieentry mo nalang sya sa ABD.
So, let’s answer the problem.

Sa accounting, paulit ulit lang ang problems hanggang magboard exam kayo. Kaya familiarize yourselves with the types of questions. Paulit ulit lang naman yan.

Ok, let’s attack the problem (naks, may ganun)

Ok, beginning balance of AR is 337,000
Syempre, add natin yung 1,500,500 sales kasi lahat naman sya ay credit sales

OK, sa collections naman tayo. Papano sya makakaafect sa AR.

So, kung mapapansin nyo, may questionmark yung collections of past due accounts. So, magkano nga ba talaga yun?

P1,600,000 – 882,000 – 495,000 – 3,000 lahat ng given collections = 220,000. So, 220,000 yung para sa collection ng past due accts.

Q: Yung 11,000 ba kasama sa 1.6M?
A: hindi, wala ka naman koleksyon sa writeoff ng AR

Q: eh yung 6,000?
A: wala rin. Returns yun, hindi collections.

Ok, going back.

So, ang mga “credits” sa AR mo ay ang sumusunod:
900,000 = pertaining to the collection within 10 days
500,000 = pertaining to the collection between 10 to 15 days
220,000 = pertaining to the collection of past due accounts
11,000 = pertaining to the write-off
6,000 = pertaining to the credit memo

Saan naman sa mundo nahugot yung 900,000 at 500,000?
Eto ang tatandaan mo: sa AR, pag nakakakolekta ka nang may discount, ang iccredit natin sa AR ay yung GROSS amountng collection at HINDI ang discounted amount ng collection.

Bakit ‘kanyo? Kasi ganito ang entry:

(dr) Cash (discounted amount)
(dr) Sales Discount and Allowances (expense acct)
(cr) AR (Gross amount, the total of the Cash collection and the Discount)

So, (882,000 / 98%) = 900,000 baket dinivide sa 98%? Eh kasi yung 882,000 ay 98% nalang ng 900,000(yung gross amount ng AR pertaining to this collection) kasi diba may 2% discount.

Then. (495,000 / 99%) = 500,000 baket dinivide sa 99%? Eh kasi yung 495,000 ay 99% nalang ng 500,000 (yung gross amount ng AR pertaining to this collection) kasi diba may 1% discount.

Q: eh bakit yung other 3 items (collection of past due acct, write-off, at credit memo) hindi dinivide sa percentage?
A: eh kasi po, wala silang discount.

Malinaw na po?

So, ang balanse ng AR:
337,000
+1,500,500
-900,000
-500,000
-220,000
-11,000
-6,000
Equals: 200,500

Ok, punta nman tayo sa ABD.
Diba sabi ko, gawin muna lahat ng entries for the year bago ang adjusting entries? So, ipasok natin yung 3,000 na recovery as addition (alam nyo na kung bakit diba kasi recovery increases ABD and no effect sa AR) and yung 11,000 na write-off as deduction (debit).

Papano na yung impairment loss? Since given na explicitly yung amount ng impairment loss, wag na matigas ang ulo, yan na ang impairment loss. Ehehehe.

So ang entry:
(dr) Impairment loss 15,000
(cr) Allowance for bad debts 15,000

(pero kung hindi explicitly given ang amount ng impairment loss, you will have to compute for it using the recoverable amount of AR para malaman yung ending balance ng ABD)

So, ang ABD:
12,000 + 3,000 – 11,000 + 15,000 = 19,000

Ok, so ang Sagot:
AR balance as of dec 31, 2009 = 200,500
ABD = 19,000

may tanong po? 

kung merong problem sa book regarding net recoverable amount ng AR, post nyo lang para masampolan natin. 

happy new year sa lahat! bagong taon, bagong pag-asa!

Tiyo Paeng, masaya kong sasagutin ang problema nyo. Mas maganda kung mas mahirap yung problem na ippost nyo (yung may mga super weird sa 4-column) para maiexplain ko kung bakit add or subtract.