On December 31, of the current year, Happening Company's unadjusted trial balance revealed the following: Accounts receivable of Php 9.25 Million; Gross Sales of Php 65 million; (80% were on credit), Sales Returns and Allowances of Php 3 million (attributable to credit sales) and Allowance for Doubtful Accounts of Php 180,000 (credit balance). Prepare the adjusting journal entry to record Happening's estimate for bad debts assuming: 1. 5.0% of the accounts receivable balance is assumed to be uncollectible. 2. Bad debts expense is estimated to be .6% of credit sales. 3. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet (book value) after adjustment assuming the percentage of sales method is used. 4. Prepare the entry to write off a Php 128,000 account receivable on January 1 of the next year. 5. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet (book value) immediately after writing off the account in #4 assuming the percentage of sales method is used. 6. Prepare the entry if Php half of the previously written off Php 128,000 has been subsequently collected. 7. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet (book value) after recovery of written off account in #6 assuming the percentage of sales method is used.
On December 31, of the current year, Happening Company's unadjusted trial balance revealed the following: Accounts receivable of Php 9.25 Million; Gross Sales of Php 65 million; (80% were on credit), Sales Returns and Allowances of Php 3 million (attributable to credit sales) and Allowance for Doubtful Accounts of Php 180,000 (credit balance). Prepare the adjusting journal entry to record Happening's estimate for bad debts assuming: 1. 5.0% of the accounts receivable balance is assumed to be uncollectible. 2. Bad debts expense is estimated to be .6% of credit sales. 3. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet (book value) after adjustment assuming the percentage of sales method is used. 4. Prepare the entry to write off a Php 128,000 account receivable on January 1 of the next year. 5. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet (book value) immediately after writing off the account in #4 assuming the percentage of sales method is used. 6. Prepare the entry if Php half of the previously written off Php 128,000 has been subsequently collected. 7. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet (book value) after recovery of written off account in #6 assuming the percentage of sales method is used.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
Transcribed Image Text:On December 31, of the current year, Happening Company's unadjusted trial balance revealed the following:
Accounts receivable of Php 9.25 Million; Gross Sales of Php 65 million; (80% were on credit), Sales Returns
and Allowances of Php 3 million (attributable to credit sales) and Allowance for Doubtful Accounts of Php
180,000 (credit balance).
Prepare the adjusting journal entry to record Happening's estimate for bad debts assuming:
1. 5.0% of the accounts receivable balance is assumed to be uncollectible.
2. Bad debts expense is estimated to be .6% of credit sales.
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance
sheet (book value) after adjustment assuming the percentage of sales method is used.
4. Prepare the entry to write off a Php 128,000 account receivable on January 1 of the next year.
5. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance
sheet (book value) immediately after writing off the account in #4 assuming the percentage of sales method
is used.
6. Prepare the entry if Php half of the previously written off Php 128,000 has been subsequently collected.
7. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance
sheet (book value) after recovery of written off account in #6 assuming the percentage of sales method is
used.
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