Prepare working papers for the above account How would you present these notes on the balance sheet.
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.
HOLIDAY INC.
On December 31, 2019, the balance of the Notes Payable accounts, P23,000 of Holiday Inc. consisted of the following notes, on which no interest has been paid:
|
Payee |
Date |
Term |
Interest |
Face |
Remarks |
|
Nation Co. |
Nov. 1 |
3 mo. |
10% |
11000 |
Trade Creditor |
|
Ace Co |
01 Oct |
4 mo. |
10% |
5,000.00 |
Trade Creditor |
|
First National Bank |
01 Oct |
3 mo. |
12% |
60,000.00 |
Discounted Oct. 1 at 12%. Secured by pledge of. 100,000 shares of the Co’s unissued capital stock. |
|
Holiday-Lenit Co. |
01 Oct |
5 yrs |
12% |
40000 |
A 50% owned subsidiary of Holiday Inc. |
|
Holiday Mfg. Co |
01 Jul |
5 yrs |
14% |
50000 |
a 70% owned subsidiary of Holiday Inc. |
|
Holiday Sales Co |
01 Apr |
5 yrs |
10% |
30000 |
A 100% owned subsidiary of Holiday Inc. |
|
Pee-pee Co. |
01 Dec |
2 mo |
12% |
6000 |
Trade creditor |
|
ABC Co. |
01 Sep |
5 mo |
10% |
8000 |
Trade creditor |
|
Hl. Reyes |
Jan. 1 |
5 yrs |
12% |
20000 |
Payee is vice-president of Holiday Inc. |
|
|
|
|
|
230000 |
All of the above notes were issued during the current audit year Three days after tie close of the audit year, you find that the company accepted a 60-day sight draft (in favor of Delta Specialties Corporation) covering merchandise shipped December 27, f.o.b. shipping point. The shipment was forwarded “60.day sight draft, order bill ‘of lading attached” forP20,000 00.
Required
- Prepare working papers for the above account
- How would you present these notes on the
balance sheet .
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