Question

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 $2 500 customer balance is determined to be uncollectable. Prepare the journal entry. (1 mark)

d)     Repeat c) assuming that the direct write-off method is used in this business. (1 mark)

Answer 1

Please find the attached sheets for detailed answer,

You may also comment me for any explanation,

Thanks,