1 how much is the adjusted balance of accounts

1. How much is the adjusted balance of Accounts Receivable as of December 31, 2006?
a. P794,000 c. P798,960
b. P793,200 d. P802,960
2. How much is the adjusted balance of the Allowance for Doubtful Accounts as of December 31,
2006?
3. How much is the net adjustment to the Allowance for Doubtful Accounts?
4. How much is the Doubtful Accounts expense for the year 2006?
P13,841
5. How much is the net adjustment to the Doubtful Accounts expense account?
a. P20,352 debit c. P24,143 credit
b. P24,263 credit d. P19,693 credit
Question No. 1
GL SL 0 to 1 1 to 3 3 to 6 Over 6
Unadjusted balances 788,000 792,960 372,960 307,280 88,720
Add (deduct):
Understatement of
accounts written off
(P6,832-P6,032) (800)
Definitely uncollectible
accounts (4,000) (4,000) (4,000)
Advances from
customers 8,000 8,000 8,000
Accounts w/ credit
balances 2,000 2,000 2,000
Unlocated difference 5,760
Adjusted balances 798,960 798,960 380,960 309,280 88,720
Suggested Solution:
24,000
20,000

Cebu CPAR Center, Inc.
Question No. 2
Account
classification
Adjusted
balance Rate
Required
Allowance
0 to 1 month P380,960 1% P 3,809.60
1 to 3 months 309,280 2% 6,185.60
3 to 6 months 88,720 3% 2,661.60
Over 6 months 20,000 P8,000 – 50% 4,000.00
P12,000 – 20% 2,400.00
P19,056.80
Question No. 3
Balance per books P48,000
Add (deduct) adjustments:
AJE No. 1 P1,296
AJE No. 2 ( 800)
AJE No. 3 (4,000)
AJE No. 4 (25,439) (28,943)
Required allowance (See No. 2) P19,057
Adjusting entries affecting Allowance for Doubtful Accounts and Doubtful Accounts Expense
1) Doubtful account expense P1,296
Allowance for doubtful accounts P1,296
To correct entry made in recording recovery of account written off
2) Allowance for doubtful accounts P800
Accounts receivable P 800
To correct understatement of accounts written off
3) Allowance for doubtful accounts P4,000
Accounts receivable P4,000
To write off definitely uncollectible accounts
4) Allowance for doubtful accounts P25,439
Doubtful account expense P25,439
To adjust allowance to required balance
Questions No. 4 & 5
Balance per books (P39,400-P1,296) P38,104
Add (deduct) adjustments:
AJE No. 1 P1,296
AJE No. 4 (25,439) (24,143)
Doubtful accounts expense per audit P13,961 (4)
(5)
A , 5) C
9
PROBLEM NO. 8
During your examination of the 2006 financial statements of the Narvacan Company you find that
the company does not provide allowance for doubtful accounts ever since it started operations in
2002 . The company’s practice is to directly write -off as expense doubtful accounts and credit
recoveries to income. The company’s contracts are generally for two years.
Upon your recommendation, the company agreed to change its accounts for 2006 to give effect to
doubtful treatment on the allowance basis. The allowance is to be based on a percentage of sales
which is derived from the experience of prior years. Statistics for 2002 to 2006 are shown as
follows:
Year of Sale 2002 2003 2004 2005
Charge Sales P2,400,000 P6,000,000 P7,200,000 P7,800,000 P6,600,000
Accounts
Written off
& Year of
Sale
2002 13,200
2003 36,000 24,000
2004 12,000 96,000 31,200
2005 28,800 108,000 36,000
2006 64,800 120,000 33,600
Recoveries &
Year of
Sale
2002
2003 2,400
2006

Cebu CPAR Center, Inc.