In: Accounting
ABC Ltd has accounts receivable of $70 600 at 30 April, 2019. An analysis of the accounts shows these amounts as follows:
Month of sale |
Balance of Accounts Receivable |
|
April, 2019 |
$40 000 |
|
March, 2019 |
23 000 |
|
February, 2019 |
3 200 |
|
January, 2019 |
4 100 |
|
December and November, 2018 |
300 |
|
70 600 |
Credit terms are 2/7, n/30. At 30 April, 2019, there is a $2000 credit balance in Allowance for Doubtful Debts before adjustment. The entity uses the ageing of accounts receivable basis for estimating uncollectable accounts. Estimates of bad debts are as follows:
Age of accounts |
Estimated percentage uncollectable |
||
Current |
2% |
||
1-30 days past due |
5% |
||
31-90 days past due |
40% |
||
over 90 days |
50% |
||
Required:
a) Determine the total estimated uncollectable. (1 mark)
b) Prepare the adjusting entry at 30 April, 2019 to record bad debts expense. (1 mark)
c) In May, 2019, a cheque for $1500 is received from the customer whose account was written off as uncollectable in February. Prepare the journal entry.
(Both account names and figures should be correct)