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Audit of adlofo corporation for calendar year 2019

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audit of Adlofo Corporation for calendar year 2019. You are now working on the audit of the accountsreceivable and related allowance for doubtful accounts.ACCOUNTS RECEIVABLE – TRADEReconciliation between General Ledger Balance andThe total of Subsidiary Ledger Balances
December 31, 2019Total of subsidiary ledger balancesP 5,635700Undelivered sales based on sales orders received upto December 31, 2019 per journal voucher No. 19622,732,900*Goods consigned to Robinsons Appliance Center and others3,260,700**Collections received from Cebu and Davao brancheson January 2 based on official receipts dated December31, 2019 for sales made on December 16, 2019( 1,092,800)***Balance per general ledgerP10,536,500*Goods are physically segregated during inventory count. Sales invoices for these were issued on January2 and deliveries to customers were made on January 3, 2006.**These goods were physically verified in customers’ stores. Under the terms of consignment, goods arebilled to customers, based upon their sales report.***Subsequently deposited on January 3, 2006.Customers are billed at 20% above cost. Term 30 days.ALLOWANCE FOR DOUBTFUL TRADE RECEIVABLESAnalysis of Movement during the YearDecember 31, 2019Allowance, December 31, 2018P 1,020,000Movement during the yearProvisions3,425,625Write-offs(4,164,370)Allowance, December 31, 2019P281,2551.Aging of accounts receivable – trade based on accounts receivable schedule as of December 31,2019, before considering any adjustments on the accounts:Per ClientPer AuditCurrentP4,469,760P4067,32031-60 days267,320402,44061-90 days455,440267,32091 days and over443,180898,620P5,635,700P5,635,7002.A review of collectivity of each account disclosed the following:a.A customer with an account balance of P568,000 classified as current in aging can no longer belocated by company lawyers. The customer’s check in payment of this account was returned bythe bank on May 15, 2019. He has no known assets and his liabilities to other creditors totaled toP7,000,000. The other creditors have the same experience as the company.b.The lawyers informed us that the debtors with account balances totaling P790,450 (classified as91 days and over in the client’s aging) were already found worthless.
d.The balance of allowance for doubtful accounts should be adequate to cover possible losses thecompany may incur in cases of non-collection: that is the account balance at the end of the yearshould be:1.Total amount arrived at as doubtful by applying the percentage of possible losses to the totalof the account age classification or2.Total amount arrived at as doubtful based upon the results of the review of collectibility ofeach account: whichever is the higher of (1) and (2) above.
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