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Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Since it started its operations in 2019, Valdo Co. carried no allowance for doubtful accounts.
Uncollectible receivables were expensed as written off and recoveries were credited to
income as collected. On March 1, 2023(after the financial statements were issued),
management recognized that Valdo accounting policy with respect to doubtful accounts was
not correct, and determined that an allowance for doubtful accounts was necessary.
Data for the five years follow:
2019
2020
2021
2022
2023
Credit sales
2,100,000
1,850,000
2,050,000
2,000,000
2,000,000
Accounts written off
20,000
40,000
130,000
22,000
113,000
The year-end balance of accounts receivable are as follows:
December 31, 2022 - P1,000,000
December 31, 2023 P1,200,000
Recoveries
15,000
20,000
5,000
20,000
40,000
Bad debts are provided for as a percentage of sales.
a) The percentage to be used to compute for the allowance for bad debts on
December 31, 2023 would be
b) How much would be the doubtful accounts expense for 2023?
c) If the allowance for doubtful accounts on January 1, 2023 is P400,000, how
much is the allowance for doubtful accounts December 31, 2023?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faace3cdb-03cb-471e-b17f-d9d3c0a80ab9%2Fb5545e73-9d1d-49b1-b25b-665ada5a8360%2Fsapri0r_processed.png&w=3840&q=75)
Transcribed Image Text:Since it started its operations in 2019, Valdo Co. carried no allowance for doubtful accounts.
Uncollectible receivables were expensed as written off and recoveries were credited to
income as collected. On March 1, 2023(after the financial statements were issued),
management recognized that Valdo accounting policy with respect to doubtful accounts was
not correct, and determined that an allowance for doubtful accounts was necessary.
Data for the five years follow:
2019
2020
2021
2022
2023
Credit sales
2,100,000
1,850,000
2,050,000
2,000,000
2,000,000
Accounts written off
20,000
40,000
130,000
22,000
113,000
The year-end balance of accounts receivable are as follows:
December 31, 2022 - P1,000,000
December 31, 2023 P1,200,000
Recoveries
15,000
20,000
5,000
20,000
40,000
Bad debts are provided for as a percentage of sales.
a) The percentage to be used to compute for the allowance for bad debts on
December 31, 2023 would be
b) How much would be the doubtful accounts expense for 2023?
c) If the allowance for doubtful accounts on January 1, 2023 is P400,000, how
much is the allowance for doubtful accounts December 31, 2023?
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