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ABC Ltd has accounts receivable of $70 600 at 30 April, 2019. An analysis of the...

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)

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