Question

On January 1, 2020 easy company reported accounts receivable P2,070,000 and allowance for doubtful accounts P80,000....

On January 1, 2020 easy company reported accounts receivable P2,070,000 and allowance for doubtful accounts P80,000.

Credit Sale Writeoffs Recoveries
2017 11,100,000 260,000 22,000
2018 12,250,000

295,000
37,000
2019 14,650,000 300,000 36,000
2020

15,000,000
310,000 40,000

The collections from customers during 2020 totaled 14 million pesos, excluding recoveries. Doubtful accounts are provided for as a percentage of credit sales. The entity calculated the percentage annually by using the experience of the three years prior to the current year.

What amount should be reported as allowance for doubtful accounts on December 31, 2020?

What is the net realizable value of accounts receivable on December 31, 2020?

Business   Accounting   
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Homework Answers

Answer #1

1. Allowance for doubtful accounts on December 31, 2020 = P15,000,000 x 2.25% = P337,500

2. Net realizable value of accounts receivable on December 31, 2020 = P3,070,000 - P337,500 = P2,732,500

Working Note:

1. Allowance for doubtful accounts % = (P260,000+P295,000+P300,000) / (P11,100,000+P12,250,000+P14,650,000) = 2.25%

2.

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