Question

MAHAL Co. sells a variety of imported goods. By selling on credit, the company cannot expect to collect 100% of its accounts receivable. At May 31, 2018, MAHAL Co. reported the following in its statement of financial position:

​Accounts Receivable​​​​​$56,966

​Less: Allowance for bad debts​​​​   (3,461)

​Net Realizable Value​​​​​$53,496

​During the year ended May 31, 2018 MAHAL Co. earned sales revenue of $13,935,082 and collected cash of $13,682,728 from customers. Assume bad debt expense for the year was 1% of sales revenue and that MAHAL Co. wrote off uncollectible accounts receivable totaling $138,628.

Required:

1. What is the accounts receivable balance at May 31, 2018?

2. What is the May 31, 2018 balance of the Allowance for Bad Debts account?

Answer 1

|1) Balance of Accounts Receivable on May 31, 2018 Particulars Accounts Receivable Balance Add: Credit Sales (S13,935,082 - $13,682,728) Less: Wrote off uncollectible accounts receivable |Accounts Receivable Balance as on May 31, 2018 |2) Balance of Allowance for bad debts on May 31, 2018: Allowance for bad debts |Add: allowance for bad debts (S13,935,082*1/100) Less: Bad debts written off Amount (S) May 31, 2018 $56,966 as on $252,354 ($138,628) $170,692 $3,461 $139,350.82 ($138,628) $4,184 Balance of Allowance for bad debts