PROBLEM 2 DI-TWO Corporation had the following accounts and their balances on December 31 before any adjustments: Sales P5,000,000 |Accounts Receivable |600,000 Allowance for doubtful accounts 25,000 Required: 1. Assuming on December 31, 2019, the Company determined that 2% of sales is uncollectible. a. What is the adjusting entry to recognize this? (show solutions) b. What is the balance of the allowance for doubtful accounts after effecting the adjustment? c. What is the net realizable balance of the accounts receivable? 2. Assuming on December 31, 2019, the company determined that 4% of accounts receivable is deemed uncollectible. a. What is the adjusting entry to recognize this? (show solutions) b. What is the balance of the allowance for doubtful accounts after effecting the adjustment? c. What is the net realizable balance the accounts receivable?
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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