33. Q sells to wholesalers on terms of 2/15, 3/30. An analysis of Q’s trade receivable balances at December 31, 20x1 revealed the following: (age in days and receivable balance, respectively) 0-15 days, P1,100,000 (not past due) 16-30 days, P860,000 (not past due) 31-60 days, P750,000 (30 days past due) 61-90 days, P350,000 (60 days past due) 91-120 days, P230,000 (90 days past due) 121-150 days, P120,000 (120 days past due) Q uses the aging of receivables method. The estimated percentages of collectability based on past experience are shown below: Accounts which are overdue for less than 31 days – 97% Accounts which are overdue 31-60 days – 90% Accounts which are overdue 61-90 days – 85% Accounts which are overdue 91-120 days – 65% Accounts which are overdue over 120 days - 40% The allowance for doubtful accounts has a balance of P84,000 as of January 1, 20x1. No write-offs or recoveries were made during the year. Q estimates that only 70% of the cash discount will be taken and concludes that it is highly probable that a significant reversal in the cumulative amount of revenue recognized will not occur as the uncertainty is resolved. The net realizable value of accounts receivable is The correct answer is: 3,242,540
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.
33. Q sells to wholesalers on terms of 2/15, 3/30. An analysis of Q’s trade receivable balances at December 31, 20x1 revealed the following: (age in days and receivable balance, respectively) 0-15 days, P1,100,000 (not past due) 16-30 days, P860,000 (not past due) 31-60 days, P750,000 (30 days past due) 61-90 days, P350,000 (60 days past due) 91-120 days, P230,000 (90 days past due) 121-150 days, P120,000 (120 days past due) Q uses the aging of receivables method. The estimated percentages of collectability based on past experience are shown below: Accounts which are overdue for less than 31 days – 97% Accounts which are overdue 31-60 days – 90% Accounts which are overdue 61-90 days – 85% Accounts which are overdue 91-120 days – 65% Accounts which are overdue over 120 days - 40% The allowance for doubtful accounts has a balance of P84,000 as of January 1, 20x1. No write-offs or recoveries were made during the year. Q estimates that only 70% of the cash discount will be taken and concludes that it is highly probable that a significant reversal in the cumulative amount of revenue recognized will not occur as the uncertainty is resolved. The net realizable value of
The correct answer is: 3,242,540
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