3) On January 1, 2020 Elisha Company reported Accounts Receivable of P1,300,000, net of allowance for bad debts of P126,000. During the year, Sales (all on credit) amounted to P4,400,000. Collections from customers including recoveries of P24,000 totaled P4,550,000 net of discounts amounting to P147,000. Likewise, P9,000 of receivables were written-off. Elisha Company uses the aging method in determining bad debts, although Elisha Company provides interim bad debts provision equal to 0.5% of net credit sales. The following table shows the corresponding bad debt percentage of Elisha Company's accounts Percentage of AR balance receivable: Age Uncollectability 45 days or less 46 – 90 days over 90 days 5% 10% 45% 30% 25% 15% The required allowance for bad debts at December 31, 2020 is A. 91,620 C. 105,120 B. 102,960 D. 116,190

3) On January 1, 2020 Elisha Company reported Accounts Receivable of P1,300,000, net of allowance for bad debts of P126,000. During the year, Sales (all on credit) amounted to P4,400,000. Collections from customers including recoveries of P24,000 totaled P4,550,000 net of discounts amounting to P147,000. Likewise, P9,000 of receivables were written-off. Elisha Company uses the aging method in determining bad debts, although Elisha Company provides interim bad debts provision equal to 0.5% of net credit sales. The following table shows the corresponding bad debt percentage of Elisha Company's accounts Percentage of AR balance receivable: Age Uncollectability 45 days or less 46 – 90 days over 90 days 5% 10% 45% 30% 25% 15% The required allowance for bad debts at December 31, 2020 is A. 91,620 C. 105,120 B. 102,960 D. 116,190

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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.

Question

3) On January 1, 2020 Elisha Company reported Accounts Receivable of P1,300,000, net of allowance for
bad debts of P126,000. During the year, Sales (all on credit) amounted to P4,400,000. Collections from
customers including recoveries of P24,000 totaled P4,550,000 net of discounts amounting to P147,000.
Likewise, P9,000 of receivables were written-off.
Elisha Company uses the aging method in determining bad debts, although Elisha Company provides
interim bad debts provision equal to 0.5% of net credit sales.
The following table shows the corresponding bad debt percentage of Elisha Company's accounts
receivable:
AR balance
Age
Percentage of
Uncollectability
45 days or less
46 - 90 days
45%
5%
10%
15%
30%
over 90 days
25%
The required allowance for bad debts at December 31, 2020 is
В.
A. 91.620
102.960
C.
105,120
D.
116,190

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