Reference no: EM132915546
From inception of operations, Masa Corporation provided for uncollectible accounts receivable under the allowance method. Provisions were made based on aging schedule wherein receivable that are 1-30 days past due the provision is 3%; 31-60 days past due is 5%; more than 60 days past due is 15%. Masa Corporation sells its products on payment term of 2/15,n/30. In the past, over 75% of the credit customers have taken advantage of the discount. The account receivable balance at December 31, 2018 is P5,000,000.
The condition of this balance in terms of age is as follows:
Age of receivable
P2,000,000............................ 1-30
1,500,000.............................31-60
1,000,000..............................61-90
500,000...........................over 90 days
Problem 1: The allowance for doubtful accounts had a credit balance of P200,000 at the start of the year. Masa Corporation has provided for a monthly bad debts expense accrual during the current fiscal year based on the assumption that 3% of gross credit sales will be uncollectible. 2018 gross credit sales amounted to P6,000,000. During 2018, P250,000 of accounts receivable were written off. In Masa Corporation's 2018 financial performance, doubtful accounts expense will amount to:
A. 170,000
B. 180,000
C. 202,000
D. 410,000
E. None of the above
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