Fabric Co. sells to wholesalers on terms of 2/15, net 30. An analysis of Fabric Co.’s trade receivable balances on December 31, 20x1, revealed the following: Age in days Receivable balances 0 – 15 180,000 16 – 30 108,000 31 – 60 90,000 61 – 90 72,000 91 – 120 54,000 121 – 150 36,000 Total accounts receivables 540,000 Fabric Co. uses the aging of receivables method. The estimated percentages of collectability based on past experience are shown below Accounts that are overdue for less than 31 days 97% Accounts that are overdue 31 – 60 days 90% Accounts that are overdue 61 – 90 days 85% Accounts that are overdue 91 – 120 days 65% Accounts that are overdue for over 120 days 40% The allowance for doubtful accounts has a balance of ₱18,000 as of January 1, 20x1. Write-offs and recoveries during the year amounted to ₱6,000 and ₱3,000, respectively. How much is the doubtful accounts expense for the year? a. 15,600 b. 9,000 c. 22,600 d. 28,200
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.
Fabric Co. sells to wholesalers on terms of 2/15, net 30. An analysis of Fabric Co.’s trade receivable
balances on December 31, 20x1, revealed the following:
Age in days Receivable balances
0 – 15 180,000
16 – 30 108,000
31 – 60 90,000
61 – 90 72,000
91 – 120 54,000
121 – 150 36,000
Total
Fabric Co. uses the aging of receivables method. The estimated percentages of collectability based on past experience are shown below
Accounts that are overdue for less than 31 days 97%
Accounts that are overdue 31 – 60 days 90%
Accounts that are overdue 61 – 90 days 85%
Accounts that are overdue 91 – 120 days 65%
Accounts that are overdue for over 120 days 40%
The allowance for doubtful accounts has a balance of ₱18,000 as of January 1, 20x1. Write-offs and
recoveries during the year amounted to ₱6,000 and ₱3,000, respectively.
How much is the doubtful accounts expense for the year?
a. 15,600
b. 9,000
c. 22,600
d. 28,200
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
