Use the following information for the next four questions: From inception of operations, Alas Company provided for bad debts expense under the allowance method. Provisions were made monthly at 2% of credit sales, bad debts written off were charged to the allowance account and recoveries of bad debts previously written off were credited to the allowance account. No year- end adjustments to the allowance account were made. The allowance for doubtful accounts was P135,000 on January 1, 2020. During the year 2020, credit sales totaled P9,200,000, interim provisions for doubtful accounts were made at 2% of credit sales, P82,000 of bad debts were written off, and recoveries of accounts previously written off amounted to P17,000. The entity prepared an aging of accounts receivable for the first time on December 31, 2020. Balance Uncollectible November - December July - October January - June Prior to January 1 2020 2,180,000.00 2% 590,000.00 10% 436,000.00 25% 242,000.00 3,448,000.00 75% Total
Use the following information for the next four questions: From inception of operations, Alas Company provided for bad debts expense under the allowance method. Provisions were made monthly at 2% of credit sales, bad debts written off were charged to the allowance account and recoveries of bad debts previously written off were credited to the allowance account. No year- end adjustments to the allowance account were made. The allowance for doubtful accounts was P135,000 on January 1, 2020. During the year 2020, credit sales totaled P9,200,000, interim provisions for doubtful accounts were made at 2% of credit sales, P82,000 of bad debts were written off, and recoveries of accounts previously written off amounted to P17,000. The entity prepared an aging of accounts receivable for the first time on December 31, 2020. Balance Uncollectible November - December July - October January - June Prior to January 1 2020 2,180,000.00 2% 590,000.00 10% 436,000.00 25% 242,000.00 3,448,000.00 75% Total
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
Transcribed Image Text:Based on the review of collectability of the account balances in the "prior to January 1 2020" aging category,
additional accounts totaling P75,000 are to be written off on December 31, 2020.
Effective with the year ended December 31, 2020, the entity adopted a new accounting method for
estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of
accounts receivable.
14. What is the required allowance for doubtful accounts on December 31, 2020?
15. What amount was recorded as doubtful accounts expense for 2020?
16. What amount should be reported as doubtful accounts expense in the income statement for 2020?
17.What is the year-end adjustment to the allowance for doubtful accounts on December 31, 2020?
Transcribed Image Text:Use the following information for the next four questions:
From inception of operations, Alas Company provided for bad debts expense under the allowance method.
Provisions were made monthly at 2% of credit sales, bad debts written off were charged to the allowance
account and recoveries of bad debts previously written off were credited to the allowance account. No year-
end adjustments to the allowance account were made.
The allowance for doubtful accounts was P135,000 on January 1, 2020. During the year 2020, credit sales
totaled P9,200,000, interim provisions for doubtful accounts were made at 2% of credit sales, P82,000 of
bad debts were written off, and recoveries of accounts previously written off amounted to P17,000.
The entity prepared an aging of accounts receivable for the first time on December 31, 2020.
Balance
Uncollectible
November - December
2,180,000.00
2%
July - October
January - June
590,000.00
10%
436,000.00
25%
Prior to January 1 2020
Total
242,000.00
75%
3,448,000.00
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