adiant Company sells a variety of imported goods. By selling on credit, Radiant cannot expect to collect 100% of its accounts receivable. At December 31, 2019, Radiant reported the following in its statement of financial position: Accounts receivable P2,197,500 Less allowance for bad debts ( 133,500) Accounts receivable, net P2,064,000 During the year ended December 31, 2020, Radiant earned sales revenue of P537,702,500 and collected cash of P528,070,500 from customers. Assume bad debts expense for the year was 1% of sales revenue and that Radiant wrote off uncollectible accounts receivabl
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.
Radiant Company sells a variety of imported goods. By selling on credit, Radiant cannot expect to collect 100% of its accounts receivable. At December 31, 2019, Radiant reported the following in its
Accounts receivable P2,197,500
Less allowance for
Accounts receivable, net P2,064,000
During the year ended December 31, 2020, Radiant earned sales revenue of P537,702,500 and collected cash of P528,070,500 from customers. Assume bad debts expense for the year was 1% of sales revenue and that Radiant wrote off uncollectible accounts receivable totaling P5,439,500.
Required:Compute for the following
a.Accounts receivable balance at December 31, 2020
b.December 31, 2020 balance of the Allowance for Bad Debts account
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