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DEBTS EXPENSE Instruction: You are the accountant of Entity Z. Your company started operations on March 7, 20x1 and have not been recognizing any loss
DEBTS EXPENSE Instruction: You are the accountant of Entity Z. Your company started operations on March 7, 20x1 and have not been recognizing any loss allowance on receivables ever since. Your external auditor raised questions on this. Accordingly, the board of directors asked you to provide them with information that can help them evaluate the available estimation methods and elect an appropriate accounting policy. You gathered the following information: Dec. 31, 20x2 2,456,000 Dec. 31, 20x1 836,000 Accounts receivable Allowance for bad debts Net Sales (80% on credit) 9,824,000 2,670,000 The Company Treasurer, with the help of the credit department, determined the following: Bad debts as a percentage of net credit sales. 2.5% Bad debts as a percentage of accounts receivable. 5% Accounts that should be written-off. o in 20x1 from 20x1 sales..... P 12,000 o in 20x2 from 20x1 and 20x2 sales P 115,000 Requirements: a. How much are the bad debts expenses in 20x2 and 20x1, respectively, under the percentage of credit sales method? b. How much are the bad debts expenses in 20x2 and 20x1, respectively, under the percentage of
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