Reference no: EM132972527
In line with your audit of Harry Corp.'s receivable balances as of December 31, 2020, the client accountant provided you the following SL-GL reconciliation:
Balance per Subsidiary Ledger P3,890,000
a. Charge for consignment sales, goods delivered in December 5, 2020. Consignee's response to inquiry indicated that 40% of goods are still unsold. All sales were made at 40% GP based on Sales. Commission rate as agreed upon is at 20% based on selling price.
(140,000)
b. Charge for deliveries on December 29, goods still in-transit under FOB Shipping Point term
39,000
c. Charge for deliveries on December 30, goods still in-transit under FOB Destination term
(18,000)
d. Charge for goods delivered on January 2 but is covered by a bill and hold agreement with a customer (contract completed in December) (20,000)
e. Subscriptions receivable from shareholders, due March 2, 2021 80,000
f. Deposits on long-term contracts 500,000
g. Credit balance in customer accounts (44,000)
h. Credit memos for merchandise returns for invoice originally dated August 10. (12,000)
i. Portion of an October 10 outstanding invoice to a customer. Expected to be returned by the customer. (6,000)
j. Cash advances to affiliated company 200,000
k. Write-off of a receivable from customer who recently declared bankruptcy. Outstanding invoices were dated April 5 (P60,000), and July 20, 2020 (P75,000) (135,000)
Balance per General Ledger P4,334,000
The client accountant also provided you the following aging of accounts receivable from the client's subsidiary ledger along with the company's policy of providing allowance for doubtful accounts:
Age Amount % Uncollectible
Current (60 days) P1,550,000 -
1-60 days past due 1,100,000 5%
61-120 days past due 740,000 10%
More than 120 days past due 500,000 20%
All sales were made under the terms 10/30, n/60. The company estimates based on past experience that 30% of the accounts that are still current will probably be paid within the discount period over the next year.
The company has not recorded any bad debt expense for the year.
Requirements:
Problem 1. What is the correct accounts receivable - trade account balance?
Problem 2. What is the carrying value/amortized cost of the accounts receivable-trade?
Problem 3. What is the correct bad debt expense for the year assuming that the unadjusted allowance for bad debts (before any audit adjustments) P105,700?