notes payable journal entries

Aging account receivable method | PU 2017 Fall

Aging account receivable method

Financial Accounting-ii – Receivables

Pokhara University (PU) 2017 Fall Q. No. 13

Apple Company distributes Cell phones. It sells on credit to retail shops and extents term of 2/5/ net 60. For accounts that are not overdue, Apple has found that 98% probability of collection. For accounts up to one month past due, the likelihood of collection decreases to 90%, If accounts are between one and two months past due, the probability of collection is 80% and if an account is more than two months past due, Apple estimates that there is only a 50% chance of collecting the receivable.

On December 31, 2010, the credit balance in Allowance for Doubtful Accounts was Rs. 15,000. The accounts of gross receivable by age, on this date are as follows:

CategoryAmount (Rs.)
Current
Past due: Less than one month
One to two month
More than two month
100,000
50,000
40,000
10,000

Required:

a. Prepare a schedule to estimate the amount of uncollectible accounts at December 31, 2010.

b. Show how accounts receivable would be presented on the December 31, 2010 on balance sheet. [20]

Solution:

Using the aging account receivable method

Schedule of uncollectible expense amount

CategoryAccount
receivable
Probability of
uncollectible (%)
Uncollectible
expense amount (Rs.)
Current
Past dues
Less than one month
One to two month
More than two month
100,000

50,000
40,000
10,000
2

10
20
50
2,000

5,000
8,000
5,000
TotalRs. 2,00,000Rs. 20,000
Required allowance
Less: Existing balance
Estimated expenses for the current period
Rs. 20,000
Rs. 15,000
Rs. 5,000

b.

Apple Company

Partial Balance sheet

Current assetsAmount
Account receivables
Less: Allowance for doubtful debt
Net account receivbles
Rs. 1,00,000
Rs. 20,000
Rs. 80,000

See, related solutions

(PU) 2016 Spring Q. No. 11, Account receivable method

Notes payable journal entry pu 2016 spring

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