The balances of the selected accounts taken from the December 31,2020 balance sheet of Madagascar Company are as follows: Accounts Receivable – P650,000 Allowance for bad debts – P50,000 The following transactions (in summary) affecting accounts occurred during the year ended December 31,2021: Sales (all account terms: 3/10, n/60) P3,000,000 Cash received from credit customers 2,400,000 Cash received includes the following: Customers paying within the 10-day discount period 1,940,000 Recovery of accounts receivable written-off 10,000 Customers paying beyond the discount period 450,000 Accounts receivable written-off as worthless 20,000 Credit memorandum issued to credit customer for sales returns and allowances 15,000 An aging of accounts receivable and estimate of uncollectible accounts at December 31,2021 revealed the following: Age Amount Probability of uncollectibility Less than 30 days P165,000 2% 31-90 days 400,000 10% More than 90 days Balance 30% What is the amount of accounts receivable that would be shown in the December 31,2021 SFP and Bad Debts Expense? 1,165,000 and 173,300 1,155,000 and 193,300 941,700 and 183,300 934,700 and 223,300
The balances of the selected accounts taken from the December 31,2020 balance sheet of Madagascar Company are as follows: Accounts Receivable – P650,000 Allowance for bad debts – P50,000 The following transactions (in summary) affecting accounts occurred during the year ended December 31,2021: Sales (all account terms: 3/10, n/60) P3,000,000 Cash received from credit customers 2,400,000 Cash received includes the following: Customers paying within the 10-day discount period 1,940,000 Recovery of accounts receivable written-off 10,000 Customers paying beyond the discount period 450,000 Accounts receivable written-off as worthless 20,000 Credit memorandum issued to credit customer for sales returns and allowances 15,000 An aging of accounts receivable and estimate of uncollectible accounts at December 31,2021 revealed the following: Age Amount Probability of uncollectibility Less than 30 days P165,000 2% 31-90 days 400,000 10% More than 90 days Balance 30% What is the amount of accounts receivable that would be shown in the December 31,2021 SFP and Bad Debts Expense? 1,165,000 and 173,300 1,155,000 and 193,300 941,700 and 183,300 934,700 and 223,300
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
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The balances of the selected accounts taken from the December 31,2020 balance sheet of Madagascar Company are as follows:
Accounts Receivable – P650,000 Allowance for bad debts – P50,000
The following transactions (in summary) affecting accounts occurred during the year ended December 31,2021:
Sales (all account terms: 3/10, n/60) P3,000,000
Cash received from credit customers 2,400,000
Cash received includes the following:
Customers paying within the 10-day discount period 1,940,000
Recovery of accounts receivable written-off 10,000
Customers paying beyond the discount period 450,000
Accounts receivable written-off as worthless 20,000
Credit memorandum issued to credit customer for sales returns and allowances 15,000
An aging of accounts receivable and estimate of uncollectible accounts at December 31,2021 revealed the following:
Age Amount Probability of uncollectibility
Less than 30 days P165,000 2%
31-90 days 400,000 10%
More than 90 days Balance 30%
What is the amount of accounts receivable that would be shown in the December 31,2021 SFP and Bad Debts Expense?
The following transactions (in summary) affecting accounts occurred during the year ended December 31,2021:
Sales (all account terms: 3/10, n/60) P3,000,000
Cash received from credit customers 2,400,000
Cash received includes the following:
Customers paying within the 10-day discount period 1,940,000
Recovery of accounts receivable written-off 10,000
Customers paying beyond the discount period 450,000
Accounts receivable written-off as worthless 20,000
Credit memorandum issued to credit customer for sales returns and allowances 15,000
An aging of accounts receivable and estimate of uncollectible accounts at December 31,2021 revealed the following:
Age Amount Probability of uncollectibility
Less than 30 days P165,000 2%
31-90 days 400,000 10%
More than 90 days Balance 30%
What is the amount of accounts receivable that would be shown in the December 31,2021 SFP and Bad Debts Expense?
1,165,000 and 173,300
1,155,000 and 193,300
941,700 and 183,300
934,700 and 223,300
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