FINANCIAL AND MANAGERIAL ACCOUNTING
FINANCIAL AND MANAGERIAL ACCOUNTING
9th Edition
ISBN: 9781265337520
Author: Wild
Publisher: MCG
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Chapter 7, Problem 5DQ
To determine

Bad debts: It refers to the amount that was expected to be received on credit sales but went uncollectible. It is a loss to the company.

Allowance for doubtful accounts: It refers to the amount that is use to keep aside by the company as a provision for the part of accounts receivable that may go uncollectible.

To explain: The reason of written off a bad debt against the allowance for doubtful accounts not reducing the estimated realizable value of a company’s accounts receivable.

Explanation:

  • The writing off a bad debt against the allowance for doubtful accounts does not reduce the estimated realizable value of a company’s accounts receivable.
  • The reason behind it, is that writing off bad debts against allowance for doubtful accounts would have the effect on accounts receivable and allowance for doubtful accounts both with the same amount by leaving the actual difference same between them.
  • The writing off a bad debt against allowance for doubtful accounts includes the journal entry of debiting allowance for doubtful accounts by crediting accounts receivable with the same amount for both the accounts.
  • So, the actual difference between the amount of the two remains the same and that results in neither decrease nor increase in the estimated realizable value of a company’s accounts receivable

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Problem No. 3 The business assets of Glea Yares and Eunice Alico appear below: Yares Alico Cash P 10,000 P 25,000 Accounts Receivable 245,000 565,000 Inventories 122,000 260,000 Land 664,000 Building 938,000 Furniture and Fixtures Total 87,000 P1,128,000 36,000 P1,824,000 000,00 000,000 19 000,008 Account Payable Notes Payable P 178,000 200,000 Yare, Capital diw 750,000 P 245,000 345,000 adi to omen Alicol, Capital Total P1,128,000 1,234,000 P1,824,000 On March 5, 2025, Yares and Alico agreed to form a partnership contributing their assets and equities subject to the following adjustments: qining arboj su to nam a. Accounts receivable of P15,000 in Yares' books and P30,000 in Alico's are uncollectible. b. Inventories of P5,500 and P6,500 are worthless in Yares' and Alico's respective books. Required: 1. In the books of Yares, prepare the necessary journal entries: a. To record the adjustments to Yares' assets b. To close the books of Yares of viande no 251qgque oroa snemu ni 2. In the…
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