ABC Co. has the following information on December 31, 20x1 before any year-end adjustments. Net credit sales 6,300,000 Accounts receivable, December 976,500 Allowance for doubtful accounts, Dec. 31 (before any necessary year-end adjustments) 53,550 Percentage of credit sales 2% The aging of receivables is shown below: Days outstanding Receivable balances % uncollectible 0 – 60 378,000 1% 61 – 120 283,500 2% Over 120 315,000 6% Total accounts receivables 976,500 Additional information: ABC Co. uses the percentage of credit sales in determining bad debts in monthly financial reports and the aging of receivables for its annual financial statements. Accounts written-off during the year amounted to ₱119,700 and accounts recovered amounted to ₱28,350. As of December 31, ABC Co. determined that ₱63,000 accounts receivable from a certain customer included in the “61-120 days outstanding” group is 95% collectible and a ₱31,500 account included in the “Over 120 days outstanding” group is worthless and needs to be written-off. 8. How much is the balance of the allowance for doubtful accounts on January 1, 20x1? a. 12,600 b. 18,900 c. 19,200 d. 23,400 9. How much is the adjusted bad debt expense to be reported in the year-end financial statements? a. 123,300 b. 128,700 c. 143,300 d. 132,300
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.
ABC Co. has the following information on December 31, 20x1 before any year-end adjustments.
Net credit sales 6,300,000
Allowance for doubtful accounts, Dec. 31 (before any
necessary year-end adjustments) 53,550
Percentage of credit sales 2%
The aging of receivables is shown below:
Days outstanding Receivable balances % uncollectible
0 – 60 378,000 1%
61 – 120 283,500 2%
Over 120 315,000 6%
Total accounts receivables 976,500
Additional information:
ABC Co. uses the percentage of credit sales in determining
and the aging of receivables for its annual financial statements.
Accounts written-off during the year amounted to ₱119,700 and accounts recovered amounted to
₱28,350.
As of December 31, ABC Co. determined that ₱63,000 accounts receivable from a certain customer
included in the “61-120 days outstanding” group is 95% collectible and a ₱31,500 account included in
the “Over 120 days outstanding” group is worthless and needs to be written-off.
8. How much is the balance of the allowance for doubtful accounts on January 1, 20x1?
a. 12,600
b. 18,900
c. 19,200
d. 23,400
9. How much is the adjusted bad debt expense to be reported in the year-end financial statements?
a. 123,300
b. 128,700
c. 143,300
d. 132,300
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
