Perseverance Inc. began the current year with the following: Accounts receivable 2,000,000 Allowance for bad debts 100,000 During the current year, the following events transpired: Accounts written off 100,000 Cash sales 500,000 Sales on account 3,000,000 Bad debt expense recognized 200,000 At the end of the current year, the entity showed a balance in accounts receivable of P3,400,000 before the allowance for bad debts. Under cash basis, what amount should be reported as sales for the current year? A. 2,000,000 B. 7,400,000 C. 5,200,000 D. 7,000,000
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.
Perseverance Inc. began the current year with the following:
Allowance for
During the current year, the following events transpired:
Accounts written off 100,000
Cash sales 500,000
Sales on account 3,000,000
Bad debt expense recognized 200,000
At the end of the current year, the entity showed a balance in accounts receivable of P3,400,000 before the allowance for bad debts.
Under cash basis, what amount should be reported as sales for the current year?
A. 2,000,000
B. 7,400,000
C. 5,200,000
D. 7,000,000
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