Jes Company has been using the 5% of net credit sales in providing for its bad debts for the past 5 years. During the year, the company has total sales of 4,000,000. 20% of the total sales are cash sales. The sales return on credit sales is 10%. The company also recovered previously written off accounts receivable in the amount of 100,000. Jes Company wrote off P50,000 accounts receivables. Collections in the accounts receivable totaled 2,000,000 including the collection on the previously written off accounts receivable. The company has already provided for bad debts expense using credit sales. The book of Jes Company shows the following beginning balance:

                                              Debit                                 Credit

Accounts Receivable                10,000,000

Allowance for bad debts                                             500,000

 

Before the issuance of the financial statements, the company decided to change its method of estimating bad debts by using 10% on the ending accounts receivable.

 

Required: Based on the result of your audit, compute the following at the end of the year:

I. Accounts Receivable

II. Allowance for bad debts before the change in method of estimating bad debts

III. Adjusted balance of allowance for bad debts

IV. Adjusted Net realizable value of accounts receivable

V. Adjusted Bad Debts Expense for the year      

 

2. On January 1, 2020, the following data was presented by Toyota Inc. concerning its Accounts Receivables:

Accounts Receivable                           P20,000,000

Allowance for Bad Debts                      (2,000,000)

Net Realizable Value of AR                 P18,000,000

 

Additional data for 2020 are as follows:

a. The total sales for 2020 is P100,000,000.

b. Toyota received P20,000,000 from cash customers during the year.

c. On July 1, 2020, a credit memo was issued to James Bond for P10,000,000.

d. On July 2, 2020, a cash customer returned a truck with a selling price of P5,000,000.

e. On September 1, 2020, the company received P27,000,000 cash from the collection of current receivables. The customers availed of the cash discount which is 10%.

f. On October 1, 2020, the company factored its account receivable from SM Inc. for P1,000,000. The gross amount of that receivable is P1,500,000 with the net realizable value of P1,200,000.

g. On November 1, 2020, the note receivable of P2,000,000 from Avatar Inc. was dishonored by non-payment. The accrued interest up to this date is P200,000.

h. On November 10, 2020, P10,000,000 accounts receivable were assigned to BDO Inc. No collection was made during 2011 according to the assignee.

i. On December 1, 2020, P5,000,000 accounts receivable written off in 2010 were recovered.

j. On December 15, 2020, P1,000,000 accounts receivable was written off.

 

Required: Based on the result of your audit, determine the following as of December 31, 2020:

I. Ending Accounts Receivable

II. Bad Debts Expense assuming the company provides 10% bad debts based on Net Credit Sales

III. Ending Allowance for Bad Debts using the assumption in number II

IV. Net Realizable Value of Accounts Receivable using the assumption in number II

V. Bad Debts Expense assuming the company provides 10% bad debts based on Ending Accounts Receivable

VI. Ending Allowance for Bad Debts using the assumption in number V

VII. Net Realizable Value of Accounts Receivable using the assumption in number V