As an audit in-charge you are reviewing the work done by your audit staff who has been assigned to

audit the accounts receivable account of Hope Inc. in line with your firm's audit of the company's

financial statements as of and for the period ended December 31, 2020. The following are the

relevant audit notes:

a. The general ledger accounts of the company revealed the following: Accounts receivable balance per general ledger P2,202,000 Less: Allowance for doubtful accounts 215,800 Amortized cost ?

b. The subsidiary ledger details are as follows: Customer Invoice Date Amount Aye Corp. 18-Dec-20 P68,900 04-Nov-20 112,000 15-Aug-20 89,500

Bee Inc. 01-Dec-20 110,000 18-Sep-20 108,700 19-Jun-20 61,000 18-Apr-20 45,800 Syi Co. 06-Nov-20 95,700 15-Jun-20 137,800

Di Inc. 23-Dec-20 98,700 11-Oct-20 123,600 09-Aug-20 56,400 12-Mar-20 101,200 Eeeh Corp. 11-Nov-20 198,400 12-Jul-20 95,400

Eff Company 04-Dec-20 131,400 04-Sep-20 67,900 16-May-20 90,800 14-Feb-20 12,500 Gee Inc. 05-Dec-20 80,600 09-Nov-20 60,500

18-Sep-20 50,400 07-Jul-20 93,400 15-Mar-20 67,300 Eych Co. 01-Sep-19 65,400 Eye Inc. See note c.2 (24,500) Total P2,198,800

c. The audit staff's examination revealed the following:

1. The negative balance in Eye Inc. subsidiary account resulted from an advance collection

from Eye Inc. for which goods shall be delivered in January of the following year.

2. The amount receivable from Eych Co. is definitely uncollectible thus has to be written off.

3. According to Aye Corp., in response to a confirmation request sent to the company, the

invoice dated August 15, 2020 has already been settled by the company. Further

investigation revealed that Aye Corp.'s payment was erroneously posted against Syi Co.

subsidiary ledger in payment of an invoice dated December 16, 2020 for the same

amount.

4. The December 1 invoice to Bee Inc. was for goods sold on the same date with an

accompanying two-months maintenance service contract (starting from the date of sale).

The service contract is considered a separate performance obligation from which a

separate service income should be recognized over the period covered. The stand-alone

selling price of the goods sold was at P90,000 while the maintenance service could be sold

separately at P30,000.

5. The February 14, 2020 invoice to Eff Company is offset by a credit memo for a sales

return issued to the said company. The credit memo was appropriately recorded in the

general books but were apparently overlooked in the posting to the subsidiary ledger.

6. The Sales Invoice to Gee Inc. dated September 18, 2020 was erroneously posted to the

subsidiary ledger at P50,400. Further investigation revealed that the correct amount

recorded in the sales journal was at P40,500.

d. The company has the following policy in providing for the allowance for bad debts.

Age Category % of Collectibility

1-60 days 98%

61-120 days 90%

121-180 days 80%

More than 180 days 60%

Requirements:

1. What is the correct accounts receivable account balance gross of allowance for bad debts?

2. What is the entry to record the unlocated difference between GL and SL?

3. What is the correct of allowance for bad debts?

4. What is the correct bad debt expense for the period?