Reference no: EM132865019

Question - On January 1, 2013, the statement of financial position of Square Company showed accounts receivable of P450,000 and allowance for doubtful accounts of P9,000. During the current year, the transactions were:

Sales on account, P4,800,000.

Cash collections of accounts receivable totaled P3,920,000, after discounts of P80,000 were allowed for prompt payment.

Bad accounts previously written off in prior year amounting to P5,000 were recovered.

The entity decided to provide P26,000 for doubtful accounts at the end of the year.

Accounts receivable of P700,000 have been pledged to a local bank on a loan of P400,000. Collections of P150,000 were made on such accounts receivable (not included in the collections previously given).

Required - What is the balance of the allowance for doubtful accounts on December 31, 2014?

a. 9,000

b. 40,000

c. 13,000

d. 35,000