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You are assigned to audit Ignation Inc. for the year ended June 30, 2022. Prior to any adjustments, you were able to extract the following balances from the client's records: Accounts receivable control account Allowance for bad debts beginning 30,150 Your audit client provided you the schedule of the accounts receivable subsidiary ledger based on ageing policy: Accounts with debit balances: 60 days old and below 61 to 120 days Over 120 days Accounts with credit balances Accounts receivable per GL P540,000 P230,000 270,000 75,000 P575,000 (35,000) P540,000

You are assigned to audit Ignation Inc. for the year ended June 30, 2022. Prior to any adjustments, you were able to extract the following balances from the client's records: Accounts receivable control account Allowance for bad debts beginning 30,150 Your audit client provided you the schedule of the accounts receivable subsidiary ledger based on ageing policy: Accounts with debit balances: 60 days old and below 61 to 120 days Over 120 days Accounts with credit balances Accounts receivable per GL P540,000 P230,000 270,000 75,000 P575,000 (35,000) P540,000

Financial Accounting
Financial Accounting
15th Edition
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter5: Accounting Systems
Section: Chapter Questions
Problem 19E: After Bunker Hill Assay Services Inc. had completed all postings for March in the current year...
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Determine the following as a result of your audit:
a. What is the correct balance of the accounts receivable as of June 30, 2022?


b. What is the balance of the allowance for bad debts as of June 30, 2022?


c. What is the balance of bad debts expense in its income statement for year ended June 30, 2022?

You are assigned to audit Ignation Inc. for the year ended June 30, 2022. Prior to any adjustments, you were able to extract the following balances from the client's records: Accounts receivable control account P540,000 Allowance for bad debts beginning 30,150 Your audit client provided you the schedule of the accounts receivable subsidiary ledger based on ageing policy: Accounts with debit balances: Accounts with credit balances Accounts receivable per GL 60 days old and below 61 to 120 days Over 120 days The credit balance in the accounts receivable represents collection from a customer whose account had been written off as uncollectible in the previous year. Upon investigation, the only entry made by the client upon the recovery was a debit to cash and a credit to accounts receivable. Customer Alpha Certain Accounts Receivable balances were circularized/confirmed as of June 30, 2022 and the following exceptions/replies have not been disposed of as at the date of your examination. Balances Audit Findings Beta P230,000 270,000 75,000 P4,000 13,800 P575,000 (35,000) P540,000 Comments from Customers This balance for the invoice dated June 5, 2022 was paid on June 29, 2022. The balance for the invoice dated June 1 was offset by our June 10, shipment of goods that were returned. Ignation Inc. received the mailed check dated July 2, 2022. Ignation Inc. erroneously credited accounts payable for P13,800 to record the purchase of goods.
Transcribed Image Text:You are assigned to audit Ignation Inc. for the year ended June 30, 2022. Prior to any adjustments, you were able to extract the following balances from the client's records: Accounts receivable control account P540,000 Allowance for bad debts beginning 30,150 Your audit client provided you the schedule of the accounts receivable subsidiary ledger based on ageing policy: Accounts with debit balances: Accounts with credit balances Accounts receivable per GL 60 days old and below 61 to 120 days Over 120 days The credit balance in the accounts receivable represents collection from a customer whose account had been written off as uncollectible in the previous year. Upon investigation, the only entry made by the client upon the recovery was a debit to cash and a credit to accounts receivable. Customer Alpha Certain Accounts Receivable balances were circularized/confirmed as of June 30, 2022 and the following exceptions/replies have not been disposed of as at the date of your examination. Balances Audit Findings Beta P230,000 270,000 75,000 P4,000 13,800 P575,000 (35,000) P540,000 Comments from Customers This balance for the invoice dated June 5, 2022 was paid on June 29, 2022. The balance for the invoice dated June 1 was offset by our June 10, shipment of goods that were returned. Ignation Inc. received the mailed check dated July 2, 2022. Ignation Inc. erroneously credited accounts payable for P13,800 to record the purchase of goods.
Charlie Delta Echo Juliet Hotel India 16,600 20,000 11,800 5,000 3,200 23,700 5% The above balance for the invoice dated April 20 has been paid 15% The records show a bigger balance, please check. We do not owe Ignation Inc. anything as the goods were received July 5, 2022, FOB Destination. Amount is okay. Since this is on consignment, we will remit payment upon selling the goods. CM No. 111 cancels this balance. No reply on the 2 sets of confirmation letters sent. The payment was credited to customer Delta's subsidiary records. A new confirmation was mailed. All outstanding invoices to Delta are dated June The shipment costing P8,000 was made on June 29, 2022 and the goods were included in recording the June 30, 2022 inventory summary. Goods costing P4,400 were appropriately included in Ignation Inc.'s inventory. The amount is included in the "below 60 days" receivables. The CM dated April 30, 2022 was recorded by Ignation Inc. in July 2022. The amount is for an April 15 sales invoices. Upon your recommendation, the management agreed to write-off this receivable. The Based on your discussions with the client, the following estimated rates are appropriate for computing the uncollectible accounts: 60 days and below 61 to 120 days More than 120 days 20% amount is for an invoice dated May 19, 2021.
Transcribed Image Text:Charlie Delta Echo Juliet Hotel India 16,600 20,000 11,800 5,000 3,200 23,700 5% The above balance for the invoice dated April 20 has been paid 15% The records show a bigger balance, please check. We do not owe Ignation Inc. anything as the goods were received July 5, 2022, FOB Destination. Amount is okay. Since this is on consignment, we will remit payment upon selling the goods. CM No. 111 cancels this balance. No reply on the 2 sets of confirmation letters sent. The payment was credited to customer Delta's subsidiary records. A new confirmation was mailed. All outstanding invoices to Delta are dated June The shipment costing P8,000 was made on June 29, 2022 and the goods were included in recording the June 30, 2022 inventory summary. Goods costing P4,400 were appropriately included in Ignation Inc.'s inventory. The amount is included in the "below 60 days" receivables. The CM dated April 30, 2022 was recorded by Ignation Inc. in July 2022. The amount is for an April 15 sales invoices. Upon your recommendation, the management agreed to write-off this receivable. The Based on your discussions with the client, the following estimated rates are appropriate for computing the uncollectible accounts: 60 days and below 61 to 120 days More than 120 days 20% amount is for an invoice dated May 19, 2021.
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