Home Surplus, Inc. began operation in May, 2011 by selling exclusively on the installment basis. Using the installment method of income recognition, the company summarized the following data at the end of the first eight-month period: installment sales, P450,000; various expenses, P23,000; accounts receivable, P330,000; and, inventory, P80,000. If the gross margin based on cost is 66-2/3%, the net income was: a. P25,000 b. P48,000 c. P57,000 d. P80,000
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.
Home Surplus, Inc. began operation in May, 2011 by selling exclusively on the installment basis. Using the installment method of income recognition, the company summarized the following data at the end of the first eight-month period: installment sales, P450,000; various expenses, P23,000;
a. P25,000
b. P48,000
c. P57,000
d. P80,000
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