Question

All transactions below are related to Australia Ltd’s accounts receivable and bad debts for the financial year ended 30 June 2019. Note that Australia Ltd uses an allowance approach.
Jul 20 Wrote off the $722 account of Fiji as uncollectable.
Dec 19 Scotland unexpectedly paid off $1,800 of their debt which had been written off previously.
Mar 28 Received 60 per cent of the $1,030 balance owed by Tonga and wrote off the remainder as uncollectable.
Jun 30 Estimated bad debts for the year to be 2 per cent of net credit sales of $550,000.

Assume that the Accounts Receivable account had a balance of $252,000 at 30 June 2019, and the beginning balance (1 July 2018) in the Allowance for Doubtful Debts account was $15,400.
Required:
Ignore GST. Show supporting calculations.
(a) Prepare the required journal entries for the above transactions. Narratives are not required.

(b) Determine the expected collectable amount for the Accounts Receivable at 30 June 2019

Answer 1

a)

Date	Account title	Debit	Credit
Jul-20	Allowance for doubtful accounts	$        722
	Accounts receivable		$        722
Dec-19	Accounts receivable	$    1,800
	Allowance for doubtful accounts		$    1,800
	Cash	$    1,800
	Accounts receivable		$    1,800
$ 43,918	Cash ($1,030*60%)	$        618
	Allowance for doubtful accounts	$        412
	Accounts receivable		$    1,030
$ 44,012	Baddebt expenses ($550,000*2%)	$ 11,000
	Allowance for doubtful accounts		$ 11,000

b)

Accounts receivable	$ 252,000
Less: Allowance for doubtful accounts ($15,400-722+1,800-412+11,000)	$ (27,066)
expected collectable amount for the Accounts Receivable at 30 June 2019	$ 224,934

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