1. What is the correct accounts receivable – trade account balance? 2. What is the carrying value of the accounts receivable –trade? 3. What is the correct bad debt expense for the year assuming that the allowance for bad debts based on aging of trade receivables at the beginning of the year was at P5,400?
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.
1. What is the correct
2. What is the carrying value of the accounts receivable –trade?
3. What is the correct bad debt expense for the year assuming that the allowance for
![The following summarizes the transactions recorded in the Accounts receivable-trade account of Presario
Corporation:
Accounts Receivable - Trade
Jan. 1 balance, net of credit
P9,000 balance
Charge sales
Charge for consignment sales
(note a)
Shareholders subscriptions
Receipts from customers, including
overpayment of P10,000
P106,000
1,250,000 Write offs of bad debts
25,000 Merchandise returns
P1,240,000
7,000
5,500
receivables
Recovery of previous write-offs
Refunds to customers w/credit
60,000 Allowance to customers for
shipping damages
5,000 Collections on carrier claims
Collection on subscription
3,000
2,000
45,000
balances
5,000
50,000
Deposit on long-term contracts
Claims against common carrier
for shipping damages
IOUS from employees
Cash advance to affiliate
Advances to supplier
5,000
1,000
50,000
10,000
Audit notes:
a. No sales were made yet by the consignee on goods out on consignment.
b. It was ascertained that half of the adjusted outstanding accounts receivable-trade balance are still
currently collectible. The term of sale is 5/30, n/60. Based on past experience, a 25% of
customers whose accounts are still current normally pay within the discount period.
c. 30% of the adjusted accounts receivable-trade is 60 days past due and is expected to be only
90% collectible.
d. 20% of the adjusted accounts receivable-trade balance is more than 120 days past due and is
expected to be 50% collectible.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5588e579-f179-4845-a4ca-878a568840a7%2F2649e268-2254-4a72-ac23-f518a8d94f6b%2Fih3v5on_processed.png&w=3840&q=75)
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