Existence of Accounts ReceivableTo substantiate the existence of the accounts receivable balances as at December 31, 2020 of Guipetacio Company, you have decided to send confirmation requests to customers. Below is a summary of the confirmation replies together with the exceptions and audit findings. Gross profit on sales is 20%. The company is under the perpetual inventory method.CustomerBalances per Books (in PHP)Comments from customersAudit FindingsAbejo50,000P30,000 on January 2,2021. Correct balance is20,000.Returned goods receivedJanuary 5, 2021.Pacturan10,000Your credit memorepresenting priceadjustment datedDecember 29. 2020cancels this.The credit memo wastaken up by Pacturan in2021Badilla48,000You have overpriced usby P50. Correct priceshould be P100.The complaint is valid.Villaranda37,500We received the goodsonly on January 5, 2021.Term is shipping pointshipped in 2020.Dacer45,000Balance was offset by ourDecember shipment ofyour raw materials.Guipetacio creditedaccounts payable forP45,000 to recordpurchases. Dacer issupplier.Required:Compute the effect on 2020 net income of Guipetacio Company of its failure to recordcredit memo involving transaction with Pacturan.

Accounts Receivable which refers to the amount due against the delivered goods but it is not paid…

Answered: To substantiate the existence of the…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter6: Cash And Receivables

Section: Chapter Questions

Problem 8P

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Existence of Accounts Receivable
To substantiate the existence of the accounts receivable balances as at December 31, 2020 of Guipetacio Company, you have decided to send confirmation requests to customers. Below is a summary of the confirmation replies together with the exceptions and audit findings. Gross profit on sales is 20%. The company is under the perpetual inventory method.

Customer	Balances per Books (in PHP)	Comments from customers	Audit Findings
Abejo	50,000	P30,000 on January 2, 2021. Correct balance is 20,000.	Returned goods received January 5, 2021.
Pacturan	10,000	Your credit memo representing price adjustment dated December 29. 2020 cancels this.	The credit memo was taken up by Pacturan in 2021
Badilla	48,000	You have overpriced us by P50. Correct price should be P100.	The complaint is valid.
Villaranda	37,500	We received the goods only on January 5, 2021.	Term is shipping point shipped in 2020.
Dacer	45,000	Balance was offset by our December shipment of your raw materials.	Guipetacio credited accounts payable for P45,000 to record purchases. Dacer is supplier.

Required:
Compute the effect on 2020 net income of Guipetacio Company of its failure to record
credit memo involving transaction with Pacturan.

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