Professional Documents
Culture Documents
Required:
1. Prepare journal entries pertaining to accounts receivable
2. What is the correct amount of doubtful accounts expense, allowance for
doubtful accounts, and net realizable value under each of the following
methods:
1. Percentage of sales – the estimate is 1% of net sales
2. Percentage of accounts receivable – the company is using this method
consistently
Before any adjustments were made, Vaughn’s allowance for doubtful accounts had a
balance of P100,000.
Required:
1. How much is the balance of allowance for doubtful accounts at the end of
the year?
2. How much is the doubtful accounts expense?
3. How much is the net realizable value?
Illustrative 3: From the inception of operations to Dec. 31, 2023, Heroes Corp. provided
for uncollectible accounts receivable under the allowance method: provisions were made
monthly at 2% of credit sales; bad debts written off were charged to the Allowance
account; and no year-end adjustments to the Allowance account were made. Heroes’ usual
credit terms are net 30 days.
The balance in the Allowance for Doubtful Accounts was P143, 000 at January 1, 2023.
During 2023, credit sales totaled P15,000,000; interim provisions for doubtful accounts
were made at 2% of credit sales, P140,000 of bad debts were written off, and recoveries
of accounts previously written off amounted to P43,000. Heroes installed a computer
facility in November 2023 and an aging of accounts receivable was prepared for the first
time as of December 31, 2023. A summary of the aging is as follows:
Based on the review of the collectability of the account balances in the ‘Prior to Jan. 1,
2023’ aging category, additional receivables totaling P120,000 were written off as of
December 31, 2023. The 70% uncollectible estimate applies to the remaining P180,000
in the category.
Effective with the year ended December 31, 2023, Heroes adopted a new accounting
method for estimating the allowance for doubtful accounts at the amount indicated by the
year-end aging analysis of accounts receivable.
Required:
1. What is the balance of the allowance for doubtful accounts on December
31, 2023 before year-end adjustments?
2. What is the additional expense, if any, to adjust the existing allowance?
3. For the year ended December 31, 2023, Heroes’ doubtful accounts expense
would be?
4. How much is the net realizable value of Heroes’ accounts receivable at
December 31, 2023?