Great Outdoors Ltd sells outdoor furniture settings on credit. The accounting records at 30 June 2015 reveal the following. Ignore GST.
Credit sales (for year) $984,000
Credit sales returns and allowances (for year) 83,000
Accounts receivable (balance 30 June 2015) 300,500
Allowance for doubtful debts (credit balance 30 June 2015) 1,500
n the past, the company's yearly bad debts expense had been estimated at 2% of net credit sales revenue. It was decided to compare the current method with an ageing of the accounts receivable method. The following analysis was obtained with respect to the accounts receivable:
Balance % estimated uncollectable
Accounts not yet due $161,600 1/2
Accounts overdue: 10–30 days 56,100 2
31–60 days 40,500 10
61–120 days 23,400 25
121 days and over 18,900 40
TOTAL $300,500
Using the journal entries from requirement C, determine the balance in the allowance account under both methods.
use T Aaccounts
journal entries in part c were
Assume that the allowance account had a debit balance of $780 at
30 June 2014. Show the journal entries to record the allowance for
doubtful debts at 30 June 2015 under:
1. | the net credit sales method | |
2. |
the ageing of accounts receivable method. |
Date |
Accounts title |
Debit |
Credit |
30-Jun-15 |
Bad Debt Expense |
$18,020 |
|
Allowance for Doubtful Accounts |
$18,020 |
||
(to record bad debts) |
Date |
Accounts title |
Debit |
Credit |
30-Jun-15 |
Bad Debt Expense |
$17,890 |
|
Allowance for Doubtful Accounts |
$17,890 |
||
(to record bad debts) |
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Great Outdoors Ltd sells outdoor furniture settings on credit. The accounting records at 30 June 2015 reveal the followi...
Great Outdoors Ltd sells outdoor furniture settings on credit. The accounting records at 30 June 2015 reveal the following. Ignore GST. Credit sales (for year) $984,000 Credit sales returns and allowances (for year) 83,000 Accounts receivable (balance 30 June 2015) 300,500 Allowance for doubtful debts (credit balance 30 June 2015) 1,500 In the past, the company's yearly bad debts expense had been estimated at 2% of net credit sales revenue. It was decided to compare the current method with an...
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