Problem 5-7 (AICPA Adapted)From inception of operations, Savvy Company carried noallowance for doubtful accounts.Uncollectible receivables were expensed as written off andrecoveries were credited to income as collected.During the current year, management recognized that theaccounting policy with respect to doubtful accounts was notcorrect, and determined that an allowance for doubtful accountswas necessary.A policy was established to maintain an allowance for doubtfulaccounts based on historical bad debt loss percentage appliedto year-end accounts receivable.The historical bad debt loss percentage is to be recomputedeach year based on all available past years up to a maximum offive years.Accountswritten offYearCredit salesRecoveries1,500,0002,200,0003,000,0003,300,0004,000,000201615,00040,00050,00065,00088,00020172,0003,0005,00010,000201820192020Accounts receivable balances were P1,250,000 and P2,000,000on January 1, 2020 and December 31, 2020, respectively.Required:1. Prepare journal entry to set up the allowance for doubtfulaccounts on January 1, 2020.2. Compute the doubtful accounts expense for the current year,3. Determine the net realizable value of accounts receivableon December 31, 2020.AV149

Bad debts: Bad debts are defined as the expenses that are occurred when the accounts receivables are…

Required: 1. Prepare journal entry to set up the allowance for doubtful accounts on January 1, 2020. 2. Compute the doubtful accounts expense for the current year, 3. Determine the net realizable value of accounts receivable on December 31, 2020.

Required: 1. Prepare journal entry to set up the allowance for doubtful accounts on January 1, 2020. 2. Compute the doubtful accounts expense for the current year, 3. Determine the net realizable value of accounts receivable on December 31, 2020.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

Problem 36RSCQ

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Problem 23 From inception of operation in 2017, Danica Company carried no allowance for doubtful accounts. Uncollectible receivables were expensed as written off and recoveries were credited to income as collected. On March 1, 2021, after the 2020 financial statements were issued, management recognized that Danica’s accounting policy with respect to doubtful accounts was not correct and determined that an allowance for doubtful accounts was necessary. A policy was established to maintain an allowance for doubtful accounts based on Danica’s historical bad debt loss percentage applied to year end accounts receivable. The historical bad debt loss percentage is to be recomputed each year based on the relationship of net write offs to credit sales for all available past years up to a maximum of five years. Information from Danica’s records for five years is as follows: Year Credit sales Accounts written off Recoveries 2017 P 750,000 P 7,500 Nil 2018 1,100,000 20,000 P 1,000…
29. In accordance with the GAM for NGAs and the Revised Chart of Accounts, how does a government entity recognize the uncollectability of accounts receivable? By debiting the “Bad debts Expense” account Be debiting the “Impairment Loss-Loans and Receivable Account.” By debiting the “Allowance for Impairment-Accounts Receivable Account. b and c
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An aging of a company's accounts receivable indicates that $9700 is estimated to be uncollectible. If Allowance for Doubtful Accounts has a $3010 balance, the adjustment to record bad debts for the period will require a(n)
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Question 6 Which of the following substantive procedures would most likely help an auditor determine whether accounts payable have been misstated? Examining reported purchases orders that appear to be too low. Reviewing disbursements subsequent to year end to determine if liabilities have been properly recorded on the year-end balance sheet. Searching customer returned goods that were not reported as returns. None of the answers provided
PLEASE ANSWER ASAP Problem No. 3 You are auditing the accounts receivable and the related allowance for bad debts account of AACA Company. The following data are available: General Ledger Accounts Receivable 2022 Dec. 31 381,600 Allowance for Bad Debts 2022 2022 Jul. 31 GJ Write-off 7,200 Jan. 1 Balance 9,000 Dec. 31 GJ - Provision 21,600 Summary of Aging Schedule The summary of the subsidiary ledger balances as of December 31, 2022, is shown below: Debit balances Under one month P 162,000 One to six months 165,600 Over six months 68,400 P 396,000 Credit balances Mark Co. P 3,600 OK; additional billing in Jan. 2023 Lady Co. 6,300 Should have been credited to Ivan Co.* 8,100 Advance on a sales contract P 18,000 *Account is in “one to six months” classification. The…
3. What kind of an account (asset, liability, etc.) is Allowance for Doubtful Accounts, and is its normal balance a debit or a credit? 4. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $673,400 and Allowance for Doubtful Accounts has a balance of $11,900. Describe how the accounts receivable and the allowance for doubt-ful accounts are reported on the balance sheet.
Q1 The following are specific balance-related audit objectives applied to the audit of accounts receivable (a. through h.) and management assertions about account balances (1 through 4). The list referred to in the specific balance-related audit objectives is the list of the accounts receivable from each customer at the balance sheet date. Specific Balance-Related Audit Objective a . There are no unrecorded receivables. b . Receivables have not been sold or discounted. c . Uncollectible accounts have been provided for. d . Receivables that have become uncollectible have been written off. e . All accounts on the list are expected to be collected within 1 year. f . The total of the amounts on the accounts receivable listing agrees with the general ledger balance for accounts receivable. g . All accounts on the list arose from the normal course of business and are not due from related parties. h . Sales cutoff at year-end is proper. ----------------- Management Assertion about…
Q1 The following are specific balance-related audit objectives applied to the audit of accounts receivable (a. through h.) and management assertions about account balances (1 through 4). The list referred to in the specific balance-related audit objectives is the list of the accounts receivable from each customer at the balance sheet date. Specific Balance-Related Audit Objective a . There are no unrecorded receivables. b . Receivables have not been sold or discounted. c . Uncollectible accounts have been provided for. d . Receivables that have become uncollectible have been written off. e . All accounts on the list are expected to be collected within 1 year. f . The total of the amounts on the accounts receivable listing agrees with the general ledger balance for accounts receivable. g . All accounts on the list arose from the normal course of business and are not due from related parties. h . Sales cutoff at year-end is proper. Management Assertion about Account Balances 1 .…
Question 6On 30 June, the end of its financial year, Aarav Ltd completed an age analysis of itsaccounts receivable and determined that an allowance for doubtful debts of $12 320was needed in order to report accounts receivable at their estimated collectableamount in the Balance Sheet.Required(a) Prepare the general journal entry to record bad debts expense assuming that theAllowance for Doubtful Debts account currently has a $1940 credit balance(narration not required).(b) Prepare an entry to write off an account receivable from V. Vijay for $781(narration not required). (c) From the following information, determine the amount of cash received fromcustomers during 2019-20:Accounts receivable (30-Jun-2019) $81 000Accounts receivable (30-Jun-2020) $76 000Sales (Credit) $350 000 (d) From the following information, determine the amount of purchases for the year:Beginning inventory $ 60 000Ending inventory 90 000Cost of sales 130 000 (e) If wages expense for the year is $480 000, wages…