Question

I Q3. (25 marks) Header The following account balances were found for Jetson Corp. at the beginning of its fiscal year, January 1, 2020: Accounts Receivable $1,240,250 Allowance for Doubtful Accounts 19,220 Sales for the year were $8,100,000, of which 60% was on credit, and sales returns were $146,000. Cash collections, excluding recoveries, were $5,416,000. Jetson had also written off $62,500, of which half was later recovered and collected. The company's credit and collection manager has estimated that 5% of outstanding accounts receivable are uncollectible. Instructions Calculate the bad debt expense for the year and record the appropriate journal entry. How do your differentiate between IFRS and ASPE in that method? 5 Q4. (25 marks) He:

Answer 1

1. Journal Entries -

Date Credit 1 Jetson Corp. Journal Entries Accounts Title Debit Cash $3,240,000 Accounts Receivable $4,860,000 Sales Revenue (Being Sales revenue earned) $8,100,000 2 Sales Return & Allowance $ 146,000 Accounts Receivable (Being Sales Returned) $ 146,000 3 Cash $5,416,000 Accounts Receivable (Being Cash Received) $5,416,000 4 62,500 Allowance for doubtful accounts $ Accounts Receivable (Being Bad debts charged) $ 62,500 5 Accounts Receivable $ 31,250 Allowance for doubtful accounts (Being half of the bad debts recovered) $ 31,250 6 Cash $ 31,250 Accounts Receivable (Being amount received on account) $ 31,250 7 Bad Debts $ 40,575 Allowance for doubtful accounts (Being 6% provision made on acccounts) $ 40,575

Explanation -

1. Calculation of Allowances for doubtful accounts = Op. Bal. $19,220 - $62,500 + $31,250 = -$12,030

Accounts Receivable - Op. Bal $1,240,250 + Cr. Sales $4,860,000 - Return $146,000 - Receipts - $5,416,000 - Write off $62,500 + Recovered $31,250 - Received $31,250 = $475,750

6% of AR = $28,545

Balance in Allowances for doubtful accounts = -$12,030 - $28,545 = $40,575.

2. Difference in IFRS and ASPE -

1. Both the percentage of credit sales method and the aging of accounts receivable method are acceptable under ASPE and IFRS.

2. The direct write-off method is not acceptable under ASPE and IFRS.

3. Matching Principle is applied in ASPE and From IFRS Matching principle is removed.