Dos Enterprises has historically reported bad debt expense of 5% of sales in each quarter. The entity followed the same procedure in the three quarters of the current year. However, in the fourth quarter, the entity determined that bad debt expense for the entire year should be P450,000. Sales in each quarter of the year were 1st quarter - P2,000,000, 2nd quarter P1,500,000, third quarter P2,5000,000 and fourth quarter P4,000,000. What amount should be recognized as bad debt expense for the fourth quarter?
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.
Step by step
Solved in 2 steps
