Reference no: EM133257273

Question: Information on Fog Co as of Dec. 31, 20x1 is as follows:
Net credit sales   4,200,000
Accounts receivable, Dec. 31 651,00o
Allowance for bad debts, Dec. 31 (unadjusted) 35,700
Percentage of credit sales 2%

Fog Co. uses the percentage of credit sales in determining bad debts in monthly financial reports and the aging of receivables in annual financial statements. Fog Co.'s aging schedule on Dec. 31, 20x1 is as follows:

Days outstanding                Receivable balances       % uncollectible
0 - 60                                      252,000                         1%
61 -120                                    189,000                         2%
Over 120                                   210,000                         6%

Total accounts receivables           651,000
- Fog Co. wrote-off P79,800 accounts and recovered P18,900 accounts during the year.
- On Dec. 31, Fog Co. determined that P42,000 accounts receivable from a certain customer included in the "61-120 days outstanding" group is 95% collectible and a P21,000 account included in the "Over 120 days outstanding" group is worthless and needs to be written-off.

Requirements: Compute for the following:
a. Unadjusted bad debt expense recognized during the year.
b. Balance of the allowance for bad debts on January 1, 20x1.
c. Adjusted balance of the allowance account on Dec 31, 20x1
d. Adjusted bad debts expense for the year.
e. Recoverable historical cost of accounts receivable on Dec. 31.
f. Provide the necessary year-end adjusting entry(ies).