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Accounts receivable and doubtful accounts problem activities, Exercises of Accounting

Ateneo de Davao University (ADDU)Accounting

Accounts receivable and doubtful accounts problem activities

Typology: Exercises

2021/2022

Available from 05/18/2023

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1.On June 1, 2016, AAA Corp. sold merchandise with a
list price of P200,000 to BBB Corp. on account. AAA
Corp. allowed trade discounts of 20% and 10%.
Credit terms were 2/10, n/30 and sale was made
FOB shipping point. AAA Corp. prepaid P3,000 of
insurance for BBB Corp. as an accommodation.
On June 10, 2016, BBB paid AAA Corp. his full account
of
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1.On June 1, 2016, AAA Corp. sold merchandise with a

list price of P200,000 to BBB Corp. on account. AAA

Corp. allowed trade discounts of 20% and 10%.

Credit terms were 2/10, n/30 and sale was made

FOB shipping point. AAA Corp. prepaid P3,000 of

insurance for BBB Corp. as an accommodation.

On June 10, 2016, BBB paid AAA Corp. his full account

of

The following data were taken from the records of AAA Company for the year ended

  • Sales on account P 3,600, December 31, 2016:
  • Notes received to settle accounts 400,
  • Provision for doubtful accounts 90,
  • Accounts receivable determined to be worthless 25,
  • Purchases on account 3,900,
  • Payments to creditors 3,200,
  • Discounts allowed by creditors 260,
  • Merchandise returned by customer 15,
  • Collections received to settle accounts 2,450,
  • Notes given to creditors in settlement of accounts 250,
  • Merchandise returned to suppliers 70,
  • Payments on notes payable 100,
  • Discounts taken by customers 40,
  • Collections received in settlement of notes 180,

AAA Company operates in an industry that has a high rate of bad debts. On December 31, 2016, before any year-end adjustments, the accounts receivable balance was P20,000,000 and its allowance for doubtful accounts balance was P1,500,000. The year-end balance reported for the allowance for doubtful accounts is based on the following schedule: Time Outstanding Accounts Receivable Percent Uncollectible Under 30 days P10,000,000 5% 31 - 180 days 5,000,000 10% 181 - 360 days 3,000,000 30% More than one year 2,000,000 100% The accounts which have been outstanding for more than one year and 100% uncollectible would be written off immediately. What should be the doubtful accounts expense for the year ended December 31, 2016?

The following accounts were abstracted from AAA Company’s unadjusted trial balance at December 31, 2016: Debit Credit Accounts receivable P 20,000, Allowance for doubtful accounts 300, Net credit sales P 70,000, AAA estimates that 5% of the gross accounts receivable will become uncollectible. The doubtful accounts expense for the year ended December 31, 2016 should be