Global Advertising handles ads and promotions of various clients all on a credit term of 180 days. It’s an unadjusted trial balance on Dec 31, 2004, the end of it’s the first year of operation, showed among others: Accounts Receivable, P1,250,000and Professional Fee, P4,560,000, As it was only its first year, management decided to forego recording of Bad Debts. Among its Transactions, for the year 2005 are as follows

1. 1. Professional Service Rendered, P5,500,000
   2. Total collection of Previous and current Accounts, P3,500,000

 The accountant adopted a policy of providing for bad debts based on 3% of the outstanding accounts receivables at the end of the year. Prepare the following

1. Entries to record the transactions for the year 2005
2. Post to T-Accounts the entries made in requirement a.
3. Entry to adjust for bad debts on Dec 31, 2005
4. Post the adjusting entry made. What was the realizable value of the account receivable?
5. How much was the bad debt expense in the income statement  

Answer rating: 100% (QA)

Step 1 Introduction The allowance for doubtful accounts is created to record estimated bad debt ... View the full answer