ADJUSTING JOURNAL ENTRIES

Bad Debts
End of Period Adjustment

Accrued Expenses Accrued Income

Prepaid Expense Unearned Income

Depreciation Bad Debts

Bad Debts

Unpaid or
uncollectible
accounts receivable.
What will Ms. Gray do with the
uncollectible amount of P50,000?

Computation:
Loaned amount P500,000
Payment (450,000)
Uncollectible amount P 50,000

When are we going to

record the uncollectible
amount?
Accounting for Bad Debts

What will Ms. Gray do with the

Direct Write-off uncollectible amount of P50,000?

Method Computation:
Loaned amount P 500,000
Payment (450,000)
Uncollectible amount P 50,000
Allowance
Method
Measuring Bad Debts

Individual Collective
Assessment Assessment
Percentage of
Receivables

Aging Analysis
Measuring Bad Debts

Collective
Assessment
Percentage of
Receivables
Bad Debts - % of Receivables

At December 31, 2013, ABC Company estimated

that 5% of the outstanding accounts receivable
amounting to P200,000 will be uncollectible.

At December 31, 2014, ABC Company estimated

that 5% of the outstanding accounts receivable
amounting to P500,000 will be uncollectible.
Seatwork
8.18.
Bad Debts - % of Receivables
SW 8.18
The estimated uncollectible amount is equivalent to 2% of the
outstanding accounts receivable. Provide the adjusting
journal entries on December 31:
a. Outstanding accounts receivable as of December 31, 2013
amounted to P100,000.
b. Outstanding accounts receivable as of December 31, 2014
amounted to P250,000.

2013
Dec 31 Bad debts P 2,000
Allowance for bad debts P 2,000
Bad Debts - % of Receivables
SW 8.18
The estimated uncollectible amount is equivalent to 2% of the
outstanding accounts receivable. Provide the adjusting
journal entries on December 31:
a. Outstanding accounts receivable as of December 31, 2013
amounted to P100,000.
b. Outstanding accounts receivable as of December 31, 2014
amounted to P250,000.

2014
Dec 31 Bad debts P 3,000
Allowance for bad debts P 3,000
Measuring Bad Debts

Collective
Assessment

Aging Analysis
Bad Debts – Aging Analysis

At December 31, 2013, ABC Company’s accounts receivable

amounted to P200,000. The management decided to classify
the receivable according to age (in days) as follows:

Classification Amount Bad Debts Percentage

Not yet due P 100,000 2%
1-30 days past due 50,000 4%
31-60 days past due 30,000 6%
61-90 days past due 10,000 8%
Over 90 days past due 10,000 10%
Total P 200,000
Bad Debts – Aging Analysis

At December 31, 2014, ABC Company’s accounts receivable

amounted to P500,000. The management decided to classify
the receivable according to age (in days) as follows:

Classification Amount Bad Debts Percentage

Not yet due P 300,000 2%
1-30 days past due 100,000 4%
31-60 days past due 50,000 6%
61-90 days past due 30,000 8%
Over 90 days past due 20,000 10%
Total P 500,000
Seatwork
8.19.
Bad Debts – Aging Analysis

a. As of December 31, 2013, accounts receivable

amounted to P300,000. Receivable according to age
(in days) presented as follows:
Classification Amount % Uncollectible
Not yet due P 150,000 1%
1-30 days past due 100,000 5%
31-60 days past due 30,000 10%
61-90 days past due 10,000 15%
Over 90 days past due 10,000 20%
Total P 300,000
Bad Debts – Aging Analysis

b. As of December 31, 2014, accounts receivable

amounted to P400,000. Receivable according to age
(in days) presented as follows:
Classification Amount % Uncollectible
Not yet due P 200,000 1%
1-30 days past due 110,000 5%
31-60 days past due 40,000 10%
61-90 days past due 30,000 15%
Over 90 days past due 20,000 20%
Total P 400,000
Bad Debts - % of Receivables

SW 8.19
a. As of December 31, 2013, accounts receivable
amounted to P300,000.
b. As of December 31, 2014, accounts receivable
amounted to P400,000.

2013
Dec 31 Bad debts P 13,000
Allowance for bad debts P 13,000
Bad Debts - % of Receivables

SW 8.19
a. As of December 31, 2013, accounts receivable
amounted to P300,000.
b. As of December 31, 2014, accounts receivable
amounted to P400,000.

2014
Dec 31 Bad debts P 7,000
Allowance for bad debts P 7,000
Seatwork
8.21.
Bad Debts - % of Receivables
SW 8.21
A company estimates that P20,000 of its P500,000 of
accounts receivable will be uncollectible. Its Allowance
for Doubtful Accounts presently has a credit balance of
P8,000. The adjusting entry will include a __________ to
the Allowance for Doubtful Accounts.

a. Debit of P12,000
b. Credit of P12,000
c. Debit of P28,000
d. Credit of P28,000
Seatwork
8.22.
Bad Debts - % of Receivables
SW 8.22
Tara Company provided the following information pertaining to
accounts receivable on December 31, 2014:

Days outstanding Estimated Amount Estimated Uncollectible

0 – 60 1,200,000 1%
61 – 120 900,000 2%
Over 120 1,000,000 60,000
3,100,000

Under the aging method, what amount of allowance for

uncollectible accounts should be reported on December 31, 2014?
Bad Debts - % of Receivables

Under the aging method, what amount of allowance for

uncollectible accounts should be reported on December
31, 2014?

a. 90,000
b. 100,000
c. 130,000
d. 190,000
Seatwork
8.20.
Bad Debts - % of Receivables
SW 8.20
Doubtful accounts receivable is estimated at 2½% of the
balance of accounts receivable. As of December 31 of the
current year, the trial balance of the enterprise reflects:
accounts receivable, P225,000 and allowance for
doubtful accounts, P1,500.
Provide the adjusting journal entries.

2014
Dec 31 Doubtful accounts P 4,125
Allowance for doubtful accounts P 4,125
Bad Debts - % of Receivables
SW 8.20
Doubtful accounts receivable is estimated at 2½% of the
balance of accounts receivable. As of December 31 of the
current year, the trial balance of the enterprise reflects:
accounts receivable, P225,000 and allowance for
doubtful accounts, P1,500.
Provide the adjusting journal entries.
On 2015, P1,000 of the accounts receivable were
written off.
Bad Debts - % of Receivables
SW 8.20
Doubtful accounts receivable is estimated at 2½% of the
balance of accounts receivable. As of December 31 of the
current year, the trial balance of the enterprise reflects:
accounts receivable, P225,000 and allowance for
doubtful accounts, P1,500.
Provide the adjusting journal entries.
On 2015, P1,000 of the accounts receivable were written
off.
Outstanding accounts receivable as of December 31,
2015 amounted to P300,000.
Seatwork
8.23.
Bad Debts - % of Receivables
SW 8.23
Clark Co. allowance for doubtful accounts had a credit
balance of P12,000 at January 1, 2014. Clark accrues doubtful
account expense at 4% of outstanding accounts receivable of
P1,500,000. Uncollectible amounting to P48,000 were written
off.
a. Compute Clark’s Doubtful accounts expense for 2014.
P 96,000
b. How much is the balance of the Allowance for doubtful
accounts on December 31, 2014?
P 60,000
Topic next meeting:
Worksheet