LISUD AYO Corporation, provided for uncollectible accounts receivable under the allowance method since the start of its operations to December 31, 2016. Provisions were made monthly at 2 percent of credit sales; bad debts written off were charged to the alloawance account; recoveries of bad debts previously written off were credited to the allowance; and no year-end adjustments to the allowance account were made. LISUD AYO credit terms are net 30 days. The credit balance in the allowance for doubtful accounts was P260,000 at January 1, 2016. During 2016, credit sales totalled P18,000,000, interim provisions for doubtful accounts were made at 2 percent of credit sales, P180,000 of bad debts were written off, and recoveries of accounts previously written off amounted to P30,000. LISUD AYO installed a computer system in November 2016 and an aging of accounts receivable was prepared for the first time as of December 31, 2016. A summary of the aging is as follows:
LISUD AYO Corporation, provided for uncollectible accounts receivable under the allowance method since the start of its operations to December 31, 2016. Provisions were made monthly at 2 percent of credit sales; bad debts written off were charged to the alloawance account; recoveries of bad debts previously written off were credited to the allowance; and no year-end adjustments to the allowance account were made. LISUD AYO credit terms are net 30 days. The credit balance in the allowance for doubtful accounts was P260,000 at January 1, 2016. During 2016, credit sales totalled P18,000,000, interim provisions for doubtful accounts were made at 2 percent of credit sales, P180,000 of bad debts were written off, and recoveries of accounts previously written off amounted to P30,000. LISUD AYO installed a computer system in November 2016 and an aging of accounts receivable was prepared for the first time as of December 31, 2016. A summary of the aging is as follows:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
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
How much is the adjusted balance of the allowance for doubtful accounts as of December 31, 2016?
Transcribed Image Text:LISUD AYO Corporation, provided for uncollectible accounts receivable under the allowance method since the start of its operations
to December 31, 2016. Provisions were made monthly at 2 percent of credit sales; bad debts written off were charged to the
alloawance account; recoveries of bad debts previously written off were credited to the allowance; and no year-end adjustments to the
allowance account were made. LISUD AYO credit terms are net 30 days.
The credit balance in the allowance for doubtful accounts was P260,000 at January 1, 2016. During 2016, credit sales totalled
P18,000,000, interim provisions for doubtful accounts were made at 2 percent of credit sales, P180,000 of bad debts were written off,
and recoveries of accounts previously written off amounted to P30,000. LISUD AYO installed a computer system in November 2016
and an aging of accounts receivable was prepared for the first time as of December 31, 2016. A summary of the aging is as follows:
Balance in Each Category
Estimated % Uncollectible
Classifications by Month of
sales
November-December 2016
P2,280,000
1,200,000
2%
15%
July-October 2016
January-June 2016
25%
800,000
260,000
Prior to January 1, 2016
80%
Based on the review of collectability of the account balances in the "prior to January 1, 2016" aging category, additional receivable
totalling P120,000 were written off as of December 31, 2016. Effective with the year ended December 31, 2016, LISUD AYO adopted
a new accounting method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of
accounts receivable.
How much is the adjusted balance of the allowance for doubtful accounts as of December 31, 2016?
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