Question

Prepare journal entries to update the accounts regarding to the above mistakes made by accountant and Prepare the adjusting entries, with the consideration of the answer in first part above, for the year if Fama Corporation used the Statement of Financial Position approach and it estimated $11,000 as uncollectible in 2019. Then, Prepare the adjusting entries for the year if Fama Corporation used the Income Statement approach and it estimated 2% of net credit sales would be uncollectible in 2019. Last, Prepare partial Statement of Financial Position to show the estimated collectible amount of accounts receivable, if Statement of Financial Position approach is adopted (Note: marks will be deducted if no detailed workings and proper presentation shown).

Fama Corporation is engaged in purchases and sales of luggage bags. The company adjusts and closes its accounts annually. The financial year-end date is on 31 December. The following information was extracted from the unadjusted trial balance dated on 31 December 2019: Debit Credit 300,000 Accounts receivable Allowance for impairment Sales revenue Sales returns and allowances 3,800 1,000,000 80,000 80% of sales revenue was on credit. Besides, 80% of sales returns and allowances came from credit sales. However, the accountant forgot to record the following two unrelated transactions in 2019: Write-off of uncollectible accounts receivable of customer A Limited amounting to $20,000. Recovery of accounts receivable of customer B Limited previously written off and debited to the account of Allowance for impairment amounting to $5,600.