The following transactions relate to the gardening maintenance business of Steve Jones. The balance in the...
The following transactions relate to the gardening maintenance business of Steve Jones. The balance in the allowance for doubtful debts account on 1 July 2014 was $8,450. The bad debts during the year ended 30 June 2015 amounted to $5,930. Debtors' balances on 30 June 2015 after the bad debts had been written off total $185,180, and a new allowance of 5% of debtors is required. (Ignore GST for the purposes of this exercise.)
A) Prepare and balance the allowance for doubtful debts account for the year to 30 June 2015. using T accounts
B) Show how the above information would be
disclosed in:
| 1. | the income statement for the year ended 30 June 2015 | |
| 2. | the balance sheet as at 30 June 2015. |
Homework Answers
A)
| Allowance for Doubtful debts | |||
| Dr | Cr | ||
| Accounts Receivable | 5930 | Op. Bal. | 8450 |
| Bad debts expense | 6739 | ||
| Balance | 9259 | ||
|
Allowance for doubtful debts [185,180*5%] |
9259 |
| Add: Bad debts | 5930 |
| Less: Opening balance | 8450 |
| Bad debts expense | 6739 |
2.
Income statement - Bad expense - $6739
Balance sheet:
| Accounts receivable | 185,180 |
| Less: allowance for doubtful debts | 9259 |
| 175,921 |
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