1. What is the doubtful accounts expense for the year 2021? 2. What is the net realizable value of the accounts receivable on December 31, 2021?
Please include solutions. Thank you!
Transcribed Image Text:From inception of operation in 2017, Danica Company carried no allowance for doubtful
accounts. Uncollectible receivables were expensed as written off and recoveries were credited
to income as collected. On March 1, 2021, after the 2020 financial statements were issued,
management recognized that Danica's accounting policy with respect to doubtful accounts was
not correct and determined that an allowance for doubtful accounts was necessary. A policy
was established to maintain an allowance for doubtful accounts based on Danica's historical bad
debt loss percentage applied to year end accounts receivable. The historical bad debt loss
percentage is to be recomputed each year based on the relationship of net write offs to credit
sales for all available past years up to a maximum of five years. Information from Danica's
records for five years is as follows:
Transcribed Image Text:Accounts
Year
Credit sales
written off
Recoveries
P 750,000
P 7,500
Nil
2017
2018
P 1,000
1,100,000
1,500,000
20,000
2019
25,000
1,500
2,500
5,000
2020
1,650,000
2,000,000
32,500
2021
44,000
Accounts receivable balances were P625,000 and P1,000,000 at December 31, 2020 and
December 31, 2021, respectively.
29. What is the doubtful accounts expense for the year 2021?
30. What is the net realizable value of the accounts receivable on December 31, 2021?
Definition Definition Money that the business will be receiving from its clients who have utilized the credit provided to buy its goods and services. The credit period typically lasts for a short term, lasting from a few days, a few months, to a year.
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