Easy Company sells directly to retail customers. On January 1, 2020, the balance of the accounts receivable was P2,070,000 while the allowance for doubtful accounts was a credit of P78,000. The following data are gathered. Credit Sales Writeoffs Recoveries 2017 11,100,000 260,000 22,000 2018 12,250,000 295,000 37,000 2019 14,650,000 300,000. 36,000 2020 15,000,000. 310,000 42,000 Doubtful accounts are provided for as a percentage of credit sales. The entity calculated the percentage annually by using the experience of the three years prior to the current year. Required: a. What is the percentage of credit sales to be used in computing doubtful accounts expense for 2020? b. What amount should be reported as doubtful expense for 2020? c. What amount should be reported as allowance for doubtful accounts on December 31, 2020?
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.
Easy Company sells directly to retail customers. On January 1, 2020, the balance of the
of P78,000. The following data are gathered.
Credit Sales Writeoffs Recoveries
2017 11,100,000 260,000 22,000
2018 12,250,000 295,000 37,000
2019 14,650,000 300,000. 36,000
2020 15,000,000. 310,000 42,000
Doubtful accounts are provided for as a percentage of credit sales. The entity calculated
the percentage annually by using the experience of the three years prior to the current year.
Required:
a. What is the percentage of credit sales to be used in computing doubtful accounts
expense for 2020?
b. What amount should be reported as doubtful expense for 2020?
c. What amount should be reported as allowance for doubtful accounts on December 31,
2020?
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