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The recorded allowance for doubtful accounts should be increased by

The recorded allowance for doubtful accounts should be increased by

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The recorded allowance for doubtful accounts should be increased by 

LISUD AYO Corporation, provided for uncollectible accounts receivable under the allowance method since the start of its operations to December 31, 2016. Provisions were made monthly at 2 percent of credit sales; bad debts written off were charged to the alloawance account; recoveries of bad debts previously written off were credited to the allowance; and no year-end adjustments to the allowance account were made. LISUD AYO credit terms are net 30 days. The credit balance in the allowance for doubtful accounts was P260,000 at January 1, 2016. During 2016, credit sales totalled P18,000,000, interim provisions for doubtful accounts were made at 2 percent of credit sales, P180,000 of bad debts were written off, and recoveries of accounts previously written off amounted to P30,000. LISUD AYO installed a computer system in November 2016 and an aging of accounts receivable was prepared for the first time as of December 31, 2016. A summary of the aging is as follows: Balance in Each Category Estimated % Uncollectible Classifications by Month of sales November-December 2016 P2,280,000 1,200,000 2% 15% July-October 2016 January-June 2016 25% 800,000 260,000 Prior to January 1, 2016 80% Based on the review of collectability of the account balances in the "prior to January 1, 2016" aging category, additional receivable totalling P120,000 were written off as of December 31, 2016. Effective with the year ended December 31, 2016, LISUD AYO 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. The recorded allowance for doubtful accounts should be increased by
Transcribed Image Text:LISUD AYO Corporation, provided for uncollectible accounts receivable under the allowance method since the start of its operations to December 31, 2016. Provisions were made monthly at 2 percent of credit sales; bad debts written off were charged to the alloawance account; recoveries of bad debts previously written off were credited to the allowance; and no year-end adjustments to the allowance account were made. LISUD AYO credit terms are net 30 days. The credit balance in the allowance for doubtful accounts was P260,000 at January 1, 2016. During 2016, credit sales totalled P18,000,000, interim provisions for doubtful accounts were made at 2 percent of credit sales, P180,000 of bad debts were written off, and recoveries of accounts previously written off amounted to P30,000. LISUD AYO installed a computer system in November 2016 and an aging of accounts receivable was prepared for the first time as of December 31, 2016. A summary of the aging is as follows: Balance in Each Category Estimated % Uncollectible Classifications by Month of sales November-December 2016 P2,280,000 1,200,000 2% 15% July-October 2016 January-June 2016 25% 800,000 260,000 Prior to January 1, 2016 80% Based on the review of collectability of the account balances in the "prior to January 1, 2016" aging category, additional receivable totalling P120,000 were written off as of December 31, 2016. Effective with the year ended December 31, 2016, LISUD AYO 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. The recorded allowance for doubtful accounts should be increased by
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