Vincent Ocon Company properly reported the following balances on December 31, 2017

Accounts receivable P1,500,000

Allowance for doubtful accounts 90,000

Accrued interest receivable – loan 320,000

Loan receivable 4,000,000

a. During 2018, Vincent Ocon recorded credit sales of P9,000,000 provision for doubtful accounts at 2% of credit sales.

Accounts of P100,000 were written off during the year but accounts of P20,000 were subsequently recovered.

The balance of accounts receivable on December 31, 2018 amounted to P2,000,000 and aged as follows:

Classification Balance Estimated Uncollectible

1-60 days P 1,000,000 1%

61-120 days 400,000 5%

121-180 days 300,000 10%

181-360 days 200,000 25%

More than one year 100,000 - P40,000 is definitely uncollectible the balance is 80% uncollectible

b. The balance of the loan receivable represents the remaining amount Ioaned to LJIV Company on January 1, 2016. The total amount loaned in 2016 was P5,000,000 The terms of the loan require principal payments of P1,000,000 each year for 5 years plus interest at 8%. The first principal and interest payment was due on January 1, 2017. LJJV Company made the required payments during 2017 and 2018. However, during 2018 LJIV Company began to experience financial difficulties, requiring Vincent Ocon to reassess the collectability of the loan. On December 31, 2018, Vincent Ocon determines that the remaining principal payment will be collected but the collection of the interest is unlikely.

Based on the above and the result of your audit, determine the following (Round off present value factors to two decimal places):

1. Allowance for doubtful accounts of accounts receivable, 12/31/2018

2. The net realizable value of Accounts receivable, 12/31/2018.

3. The over(under)statement of the recorded doubtful accounts expense.

4. The loan impairment

5. The interest income for 2019.

Answer rating: 100% (QA)

1 Allow ance for doubtful accounts of accounts rece ivable 12 31 2018 Form ula Credit sales x Provis... View the full answer