The December 31, 2020 statement of financial position of Leon Company showed Accounts receivable balance of P500,000 and Allowance for Bad Debts of P48,000. Following is a summary of accounts receivable transactions recorded by the company in 2021: Credit sales during the year P 3,120,000 Total accounts collected during the year 3,020,160 Accounts written off as uncollectible 42,000 Recoveries of accounts written off in the previous year 2,160 On December 31, 2021, an aging of accounts receivable indicated the following: Age group % of total receivable amount Probability of collection Less than 60 days 60% 99% Between 61 and 22% 88% 120 days Between 121 and 180 days 15% 45% Over 180 days 3% 20% Questions: Based on the above and the result of your audit, answer the following: The adjusted gross balance of accounts receivable is? Group of answer choices 560,000 562,160 570,000 604,160 The allowance for doubtful accounts as of December 31, 2021 is: Group of answer choices 77,484 77,324 77,784 77,544 The doubtful account expense for the year 2021 is: Group of answer choices 69,324 69,624 69,664 69,124
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.
The December 31, 2020
|
Credit sales during the year |
P 3,120,000 |
|
Total accounts collected during the year |
3,020,160 |
|
Accounts written off as uncollectible |
42,000 |
|
Recoveries of accounts written off in the previous year |
2,160 |
On December 31, 2021, an aging of accounts receivable indicated the following:
|
Age group |
% of total receivable amount |
Probability of collection |
|
Less than 60 days |
60% |
99% |
|
Between 61 and |
22% |
88% |
|
120 days |
|
|
|
Between 121 and 180 days |
15% |
45% |
|
Over 180 days |
3% |
20% |
Questions: Based on the above and the result of your audit, answer the following:
The adjusted gross balance of accounts receivable is?
The allowance for doubtful accounts as of December 31, 2021 is:
The doubtful account expense for the year 2021 is:
The net realizable value of accounts receivable as of December 31, 2021 is:
Assuming that the over 180 days account is 100% uncollectible, how much is the balance of allowance for uncollectible accounts at year end?
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