Reference no: EM132787121

Jes Company has been using the 5% of net credit sales in providing for its bad debts for the past 5 years. During the year, the company has total sales of 4,000,000. 20% of the total sales are cash sales. The sales return on credit sales is 10%. The company also recovered previously written off accounts receivable in the amount of 100,000. Jes Company wrote off P50,000 accounts receivables. Collections in the accounts receivable totaled 2,000,000 including the collection on the previously written off accounts receivable. The company has already provided for bad debts expense using credit sales.

The book of Jes Company shows the following beginning balance:

                                                  Debit              Credit
Accounts Receivable         10,000,000
Allowance for bad debts                                500,000

Before the issuance of the financial statements, the company decided to change its method of estimating bad debts by using 10% on the ending accounts receivable.

Required:

Problem 1: Based on the result of your audit, compute the following at the end of the year:

I. Accounts Receivable
II. Allowance for bad debts before the change in method of estimating bad debts
III. Adjusted balance of allowance for bad debts
IV. Adjusted Net realizable value of accounts receivable
V. Adjusted Bad Debts Expense for the year