Problem 21 The unadjusted trial balance of Kate Fullo Company as at December 31, 2021 showed accounts receivable – trade with a balance of P693,000. Investigation revealed that it included amounts due from officers – P75,000; claim pending against freight company – P9,000; and refund on insurance policy – P4,500. According to the subsidiary ledger which have been thoroughly checked and rechecked, the trade accounts receivable totaled P600,000 (composed of current accounts – P375,000; two month accounts – P120,000; and accounts three months or more –P105,000). Responsible officials have acknowledged definite uncollectibility of three-month accounts with balance totaling P22,500. They have expressed doubt with respect to an additional P24,000 worth of accounts in the same category and they consider all other accounts collectible. At what net realizable value should the accounts receivable – trade be carried as of December 31?
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.
Problem 21
The unadjusted
- At what net realizable value should the accounts receivable – trade be carried as of December 31?
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