Question
ACTIVITIES/ASSESSMENT: Guide Questions: 1. Why is every cash payment not treated as an expense? 2. Why is every cash receipt not treated as an income?
ACTIVITIES/ASSESSMENT:
Guide Questions:
1. Why is every cash payment not treated as an expense?
2. Why is every cash receipt not treated as an income?
3. When is the gross sales not proper to use as a basis for determining uncollectible
accounts?
4. In what methods of computing uncollectible accounts will the beginning allowance
for bad debts be considered to arrive at the current provision?
Exercises:
1. The following are the selected account balances of El Mar Company taken from its trial
balance as of December 31, 2006.
Accounts Receivable P125,000
Allowance for Bad Debts 6,500
Sales 1,125,000
Sales Returns & Allowances 16,000
Sales discount 25,500
Required:
Give the adjusting entry, the income statement presentation of bad debts and the balance sheet
presentation for accounts receivable at its realizable value under each of the following methods
of providing for bad debts:
1. Bad debts are estimated to be 1% of gross sales.
2. Bad debts are estimated to be % of net sales.
3. Increase the allowance by 2% of the accounts receivable.
4. The allowance for bad debts should be increased to 5% of accounts receivable.
5. The aging schedule showed that uncollectible accounts will amount of P7,500.
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