2) On December 31, 2017, Sunmi Company has an outstanding accounts receivable balance of P130,000,000 broken down into: 0-60 days outstanding, P50,000,000; 61-120 days outstanding, P40,000,000; 121-365 days outstanding, P30,000,000; over one year outstanding, P10,000,000. Estimated uncollectible accounts are 2%, 5%, 10% and 25% respectively. During the current year, Sunmi wrote off P2,500,000 of accounts receivable and recovered P500,000 from accounts previously written off in prior years. On December 31, 2016, Sunmi had an allowance for doubtful accounts of P5,000,000. What amount should be reported as doubtful accounts expense for the year ended December 31, 2017? A. 5,500,000 B. 8,500,000 C. 4,500,000 D. 3,000,000
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.
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