Valix Finacc vol 1 Problem 5-18

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 5-18

1.  1,000,000 x 1%               10,000             2.  Allowance – January 1                          90,000

        400,000 x 5%               20,000                  Recoveries                                             20,000

        300,000 x 10%             30,000                  Doubtful accounts (squeeze)              200,000

        200,000 x 25%             50,000                  Total                                                    310,000

          60,000 x 100%           60,000                  Less: Writeoff (100,000 + 40,000)         140,000

     1,960,000                     170,000                   Allowance – December 31                  170,000                                                                                                  

3.  Doubtful accounts                                                             20,000

            Allowance for doubtful accounts                                                                   20,000

     Correct amount                                                                                                  200,000

     Recorded (2% x 9,000,000)                                                                                   180,000

     Understatement                                                                                                    20,000

4.  Accounts receivable – December 31                                                                1,960,000

     Less: Allowance for doubtful accounts                                                                170,000

     Net realizable value                                                                                          1,790,000