Valix Finacc vol 1 Problem 5-22

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 1 Problem 5-22

1.  Allowance – January 1, 2008                                                                               500,000

     Doubtful accounts recorded (2% x 20,000,000)                                                   400,000

     Recovery                                                                                                               50,000

     Total                                                                                                                    950,000

     Less: Writeoff (300,000 + 100,000)                                                                         400,000

     Allowance balance before adjustment                                                              550,000

2.  5,000,000 x 5%                                                                                                      250,000

     2,000,000 x 10%                                                                                                    200,000

     1,000,000 x 25%                                                                                                    250,000

     500,000 – 100,000 x 75%                                                                                        300,000

     Required allowance – December 31, 2008                                                      1,000,000

3.  Doubtful accounts                                                         450,000

            Allowance for doubtful accounts (1,000,000 – 550,000)                              450,000