From inception of operations, Comprehensive Company provided for uncollectible accounts expense under the allowance method using the percentage of sales method. No year-end adjustments to the allowance account were made. The balance in the allowance for doubtful accounts was P1,000,000 on January 1, 2020. During the current year, credit sales totaled P20,000,000 interim provisions for doubtful accounts were made at 2% of credit sales, bad debts of P200,000 were written off, and recoveries of accounts previously written off amounted to P50,000. An aging on accounts receivable was made for the first tIme on December 31, 2020. Aging Balance Uncollectible 0 - 60 6,000,000 10% 61 - 180 2,000,000 20% 181 - 360 1,500,000 30% Over 360 500,000 50% Based on the review of collectibility of the account balances in the “over 360 days” aging category, additional accounts totaling P100,000 are to be written off on december 31, 2020. Effective with the year ended December 31, 2020, the entity adopted a new accounting method in estimating the allowance for doubtful accounts at the amount indicated by the year-end aging of accounts receivable. What is the balance of the allowance for doubtful accounts on December 31, 2020 before adjustment? _______________ What is the required allowance for doubtful accounts on December 31, 2020? _______________ What amount should be reported as doubtful accounts expense for the current year? _______________
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
From inception of operations, Comprehensive Company provided for uncollectible accounts expense under the allowance method using the percentage of sales method.
No year-end adjustments to the allowance account were made.
The balance in the allowance for doubtful accounts was P1,000,000 on January 1, 2020.
During the current year, credit sales totaled P20,000,000 interim provisions for doubtful accounts were made at 2% of credit sales,
An aging on accounts receivable was made for the first tIme on December 31, 2020.
Aging Balance Uncollectible
0 - 60 6,000,000 10%
61 - 180 2,000,000 20%
181 - 360 1,500,000 30%
Over 360 500,000 50%
Based on the review of collectibility of the account balances in the “over 360 days” aging category, additional accounts totaling P100,000 are to be written off on december 31, 2020.
Effective with the year ended December 31, 2020, the entity adopted a new accounting method in estimating the allowance for doubtful accounts at the amount indicated by the year-end aging of accounts receivable.
- What is the balance of the allowance for doubtful accounts on December 31, 2020 before adjustment? _______________
- What is the required allowance for doubtful accounts on December 31, 2020? _______________
- What amount should be reported as doubtful accounts expense for the current year? _______________
- What is the year-end adjustment to the allowance for doubtful accounts on December 31, 2020? _______________
- What is the net realizable value of accounts receivable on December 31, 2020? _______________
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