XXZ Company prepared quarterly interim financial statements and used the percentage of credit sales method in computing doubtful accounts. The credit sales for the first, second, third and fourth quarters totaled P2,000,000, P1,500,000, P3,500,000 and P4,000,000 respectively. The doubtful account percentages for the first, second, third and fourth quarters effective for the entire year are 2%, 2%, 4%, and 5% respectively. What amount of doubtful accounts expense should be recognized in the fourth quarter income statement?
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.
XXZ Company prepared quarterly interim financial statements and used the percentage of credit sales method in computing doubtful accounts. The credit sales for the first, second, third and fourth quarters totaled P2,000,000, P1,500,000, P3,500,000 and P4,000,000 respectively. The doubtful account percentages for the first, second, third and fourth quarters effective for the entire year are 2%, 2%, 4%, and 5% respectively. What amount of doubtful accounts expense should be recognized in the fourth quarter income statement?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
