Exercise 3 –1 An analysis of the accounts receivable of Grammar Inc. shows the following information: % Collectible 99.5 Age Balance Current P3,500,000 2,000,000 1 to 30 days past due 31 to 60 days past due 61 to 90 days past due 91 to 120 days past due 121 to 180 days past due 181 to 360 days past due More than 360 days past đue 98 1,200,000 1,000,000 800,000 95 92 85 400,000 200,000 100,000 70 50 10 Before any adjustments were made, Grammar's allowance for doubtful accounts had a balance of P80,000. 1. Determine the required balance of Grammar's doubtful accounts at the end of the reporting period. 2. Determine the doubtful accounts expense Grammar should recognize during the period. 3. Determine the net realizable value of Grammar 's accounts receivable at the end of the period.
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.
Before any adjustments were made, Grammar’s allowance for doubtful accounts had a balance of ₱80,000.
1.Determine the required balance of Grammar’s doubtful accounts at the end of the reporting period.
2.Determine the doubtful accounts expense Grammar should recognize during theperiod.
3.Determine the net realizable value of Grammar’s
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