Accounts Receivable The following 5 accounts appeared in the general ledger of the Holiday Inc., on December 31, 2019. Accounts receivable P 260,000 Allowance for Bad debts P 33,000 Sales P1,100,000 Returned Sales and allowances P 25,000 Bad Debts Expense Over the preceding 5 years, the company has experienced an average annual loss on uncollectible accounts receivable amounting to 1% of net sales. All accounts receivables of prior years have been collected or have been written off as uncollectible. It is not known which of the accounts receivable outstanding on December 31, 2019 will become uncollectible although it is expected that the average of the preceding five years will continue. The accounts receivable subsidiary ledger on December 31 consisted of the following accounts: CBTC P 34,000 GAMI P 28,000 Philippine Airlines P 2,000 Salesman’s Advance P 1,000 Buendia, (consignment, billed at 50% over cost) P 9,000 PNB P(3,000) PANAM P 70,000 Bobis (Cash loan) P 10,000 Shanghai Supply Company P 39,000 SHELTON P 70,000 P 260,000 Required: Adjusting entries
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
The following 5 accounts appeared in the general ledger of the Holiday Inc., on December 31, 2019.
Accounts receivable P 260,000
Allowance for
Sales P1,100,000
Returned Sales and allowances P 25,000
Bad Debts Expense
Over the preceding 5 years, the company has experienced an average annual loss on uncollectible accounts receivable amounting to 1% of net sales. All accounts receivables of prior years have been collected or have been written off as uncollectible. It is not known which of the accounts receivable outstanding on December 31, 2019 will become uncollectible although it is expected that the average of the preceding five years will continue.
The accounts receivable subsidiary ledger on December 31 consisted of the following accounts:
CBTC P 34,000
GAMI P 28,000
Philippine Airlines P 2,000
Salesman’s Advance P 1,000
Buendia, (consignment, billed at 50% over cost) P 9,000
PNB P(3,000)
PANAM P 70,000
Bobis (Cash loan) P 10,000
Shanghai Supply Company P 39,000
SHELTON P 70,000
P 260,000
Required:
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