4) Erd and Kim Company operates in an industry that has a high rate of bad debts. On December 31, 2023, before any year-end adjustments, the accounts receivable balance was P20,000,000 and its allowance for doubtful accounts balance was P1,500,000. The year-end balance reported for the allowance for doubtful accounts is based on the following schedule: Percent Receivable Uncollectible 5% 10% 30% 100% Accounts Time Outstanding Under 30 days 31 - 180 days 181 - 360 days More than one year P 10,000,000 5,000,000 3,000,000 2,000,000 The accounts which have been outstanding for more than one year and 100% uncollectible would be written off immediately. What should be the doubtful accounts expense for the year ended December 31, 2023? A. 3,900,000 B. 2,400,000 C. 2,000,000 D. 1,900,000
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.
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