Case 3: Professional Company produces paints and related products for sale to the construction industry throughout Metro Manila. While sales have remained relatively stable despite a decline in the amount of new construction, there has been a noticeable change in the timeliness with which the company's customers are paying their bilis. The company sells its products on payment terms of 2/10, n/30. In the past, over 75% of the credit customers have taken advantage of the discount by paying within 10 days of the invoice date. During the year ended December 31, 2018, the number of customers taking the full 30 days to pay has increased. Current indicators are that less then 60% of the customers are now taking the discount. Uncollectible accounts as a percentage of total credit sales have risen from the 1.5% provided in the past years to 4% in the current year. In response to your request for more information on the deterioration of accounts receivable collections, the company's controlled has prepared the following report. Professional Company Accounts Receivable Collections December 31, 2018 The fact that some credit accounts will prove uncollectible is normal, and annual bad debt write-offs had been 1.5% of total credit sales for many years. However, during the year 2018, this percentage increased to 4%. The accounts receivable balance is P1,500,000 and the conditions of this balance in terms of age and probability of collection is shown below: Proportion 64% 18% 8% 5% Age of Accounts 1 - 10 days 11 - 30 days Past due 31 -60 days Past due 61 - 120 days Past due 121 - 180 days Past due over 180 days Collectible 99.0% 97.5% 95.0% 80.0% 65.0% 20.0% 3% 2% At the beginning of the year, the Allowance for Doubtful Accounts had a credit balance of P27,300. The Company has provided for a monthly bad debt expense accrual during the year based on the assumption that 4% of the total credit sales will be uncollectible. Total credit sales for the year 2018 amounted to P8,000,000 and write-offs of uncollectible accounts during the year totaled P292,500. Requirements: 1. Prepare your working papers in good form. 2. Compute for the adjusted balances of Accounts Receivables. 3. Compute for the adjusted balances of Allowance for Doubtful Accounts. 4. Prepare the adjusting journal entries as of December 31, 2018