In your audit of Ledo Plastic Corporation , you noted that the company’s statement of financial position shows the accounts receivable balance as at December 31, 2020 as follows : Accounts Receivable P 3,600,000 Allowance for Doubtful Accounts 72,000 P 3,528,000 During 2021 , transactions relating to the accounts were as follows: Sales on account , P 38,400,000 Cash received from collection of current receivable totaled P 31,360,000 after discount of P 640,000 were allowed for prompt payment Customer’s accounts of P 160,000 were ascertained to be worthless and were written off Bad debts accounts previously written prior to 2021 amounting to P 40,000 were recovered The company decided to provide for P 184,000 for doubtful accounts by journal entry at the end of the year Accounts receivable of P 5,600,000 have been pledged to a local bank on a loan of P 3,200,000. Collections of P 1,200,000 were made on these receivables (not included in the collections previously given) and applied as partial payment to the loan. Based on the stated information and the results of your audit . 1. What would be the accounts receivable balance as at December 31, 2021? A. P 9,840,000 B. P 4,240,000 C. P 8,680,000 D. P 8,640,000 2. The allowance for doubtful accounts as at December 31, 2021 is A. P 136,000 B. P 8,000 C. P 176,000 D. P 184,000 3. The net realizable value of Accounts Receivable as at December 31, 2021 is: A.P 4,104,000 B. P 8,504,000 C. P 8,456,000 D. P 8,544,000
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.
In your audit of Ledo Plastic Corporation , you noted that the company’s
|
Accounts Receivable |
P 3,600,000 |
|
Allowance for Doubtful Accounts |
72,000 |
|
|
P 3,528,000 |
During 2021 , transactions relating to the accounts were as follows:
- Sales on account , P 38,400,000
- Cash received from collection of current receivable totaled P 31,360,000 after discount of P 640,000 were allowed for
prompt payment
- Customer’s accounts of P 160,000 were ascertained to be worthless and were written off
Bad debts accounts previously written prior to 2021 amounting to P 40,000 were recovered- The company decided to provide for P 184,000 for doubtful accounts by
journal entry at the end of the year - Accounts receivable of P 5,600,000 have been pledged to a local bank on a loan of P 3,200,000. Collections of P
1,200,000 were made on these receivables (not included in the collections previously given) and applied as partial
payment to the loan.
Based on the stated information and the results of your audit .
1. What would be the accounts receivable balance as at December 31, 2021?
A. P 9,840,000
B. P 4,240,000
C. P 8,680,000
D. P 8,640,000
2. The allowance for doubtful accounts as at December 31, 2021 is
A. P 136,000
B. P 8,000
C. P 176,000
D. P 184,000
3. The net realizable value of Accounts Receivable as at December 31, 2021 is:
A.P 4,104,000
B. P 8,504,000
C. P 8,456,000
D. P 8,544,000
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