Jes Company has been using the 5% of net credit sales in providing for its bad debts
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Question:
Debit Credit
Accounts Receivable 10,000,000
Allowance for bad debts 500,000
Before the issuance of the financial statements, the company decided to change its method of estimating bad debts by using 10% on the ending accounts receivable.
Required: Based on the result of your audit, compute the following at the end of the year:
I. Accounts Receivable
II. Allowance for bad debts before the change in method of estimating bad debts
III. Adjusted balance of allowance for bad debts
IV. Adjusted Net realizable value of accounts receivable
V. Adjusted Bad Debts Expense for the year
2. On January 1, 2020, the following data was presented by Toyota Inc. concerning its Accounts Receivables:
Accounts Receivable P20,000,000
Allowance for Bad Debts (2,000,000)
Net Realizable Value of AR P18,000,000
Additional data for 2020 are as follows:
a. The total sales for 2020 is P100,000,000.
b. Toyota received P20,000,000 from cash customers during the year.
c. On July 1, 2020, a credit memo was issued to James Bond for P10,000,000.
d. On July 2, 2020, a cash customer returned a truck with a selling price of P5,000,000.
e. On September 1, 2020, the company received P27,000,000 cash from the collection of current receivables. The customers availed of the cash discount which is 10%.
f. On October 1, 2020, the company factored its account receivable from SM Inc. for P1,000,000. The gross amount of that receivable is P1,500,000 with the net realizable value of P1,200,000.
g. On November 1, 2020, the note receivable of P2,000,000 from Avatar Inc. was dishonored by non-payment. The accrued interest up to this date is P200,000.
h. On November 10, 2020, P10,000,000 accounts receivable were assigned to BDO Inc. No collection was made during 2011 according to the assignee.
i. On December 1, 2020, P5,000,000 accounts receivable written off in 2010 were recovered.
j. On December 15, 2020, P1,000,000 accounts receivable was written off.
Required: Based on the result of your audit, determine the following as of December 31, 2020:
I. Ending Accounts Receivable
II. Bad Debts Expense assuming the company provides 10% bad debts based on Net Credit Sales
III. Ending Allowance for Bad Debts using the assumption in number II
IV. Net Realizable Value of Accounts Receivable using the assumption in number II
V. Bad Debts Expense assuming the company provides 10% bad debts based on Ending Accounts Receivable
VI. Ending Allowance for Bad Debts using the assumption in number V
VII. Net Realizable Value of Accounts Receivable using the assumption in number V
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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