Exercise 3 – 2 Coachella Co. prepared the following analysis of its accounts receivable on December 31, 2020: Number of days past due Amount 0-30 P5,000,000 3,500,000 1,000,000 500,000 31-60 61-90 91-180 Over 180 100,000 23 Coachella's experience on the uncollectibility of its accounts receivables for the last five years are summarized below: End of year % Uncollectible on days overdue Year balance 0-30 31-60 61-90 90-180 Over 180 2019 P 9,700,000 3 8 18 48 79 2018 9,300,000 2 19 52 72 2017 8,800,000 4 10 21 46 85 2016 8,200,000 4 7 17 54 81 2015 7,500,000 15 50 78 Before any adjustments were made, the balance of the allowance for doubtful accounts was P175,000. Coachella determines the balance of the allowance for doubtful accounts at the average percentage of the losses for the last five years. The entity writes off receivables if they are determined to be totally worthless. 1. Compute for the adjusted balance of Coachella's allowance for doubtful accounts on December 31, 2020. 2. Compute for the doubtful accounts expense that Coachella should recognize in 2020. 3. Determine the net realizable value of Coachella's accounts receivable on December 31, 2020

Exercise 3 – 2 Coachella Co. prepared the following analysis of its accounts receivable on December 31, 2020: Number of days past due Amount 0-30 P5,000,000 3,500,000 1,000,000 500,000 31-60 61-90 91-180 Over 180 100,000 23 Coachella's experience on the uncollectibility of its accounts receivables for the last five years are summarized below: End of year % Uncollectible on days overdue Year balance 0-30 31-60 61-90 90-180 Over 180 2019 P 9,700,000 3 8 18 48 79 2018 9,300,000 2 19 52 72 2017 8,800,000 4 10 21 46 85 2016 8,200,000 4 7 17 54 81 2015 7,500,000 15 50 78 Before any adjustments were made, the balance of the allowance for doubtful accounts was P175,000. Coachella determines the balance of the allowance for doubtful accounts at the average percentage of the losses for the last five years. The entity writes off receivables if they are determined to be totally worthless. 1. Compute for the adjusted balance of Coachella's allowance for doubtful accounts on December 31, 2020. 2. Compute for the doubtful accounts expense that Coachella should recognize in 2020. 3. Determine the net realizable value of Coachella's accounts receivable on December 31, 2020

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

Exercise 3 – 2
Coachella Co. prepared the following analysis of its accounts receivable on December 31,
2020:
Number of days past due
Amount
P5,000,000
3,500,000
0-30
31-60
61-90
91-180
1,000,000
500,000
Over 180
100,000
23
Coachella's experience on the uncollectibility of its accounts receivables for the last five
years are summarized below:
End of year
% Uncollectible on days overdue
Year
balance
0-30
31-60
61-90
90-180
Over 180
2019
P 9,700,000
3
18
48
79
2018
9,300,000
2
19
52
72
2017
8,800,000
4
10
21
46
85
2016
8,200,000
4
7
17
54
81
2015
7,500,000
15
50
78
Before any adjustments were made, the balance of the allowance for doubtful accounts was
P175,000. Coachella determines the balance of the allowance for doubtful accounts at the average
percentage of the losses for the last five years. The entity writes off receivables if they are
determined to be totally worthless.
1. Compute for the adjusted balance of Coachella's allowance for doubtful accounts on
December 31, 2020.
2. Compute for the doubtful accounts expense that Coachella should recognize in 2020.
3. Determine the net realizable value of Coachella's accounts receivable on December 31,
2020

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Step 1 Concept of allowance for doubtful debts

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Step 2 Calculation of % of uncollectible using weighted average method

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Step 5 Calculation of Net realizable value of accounts receivable

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complete part 2