QUESTION 12 (Show all workings) As at 1 July 2014, Mehta Company had a debit balance...

QUESTION 12 (Show all workings)

As at 1 July 2014, Mehta Company had a debit balance in their Accounts Receivable Control account of $35,820 and a credit balance in their Allowance for Doubtful Debts account of $7,190.

On 3 October 2014, the business wrote off the account of Rue Pty Ltd for $3,040 after receiving written confirmation that the customer was declared bankrupt.

Required:

Prepare the necessary journal entry to write-off the account of Rue Pty Ltd (ignore any GST effects).

At the end of the year, 30 June 2015, Mehta Company needs to estimate and account for future bad debts. Net credit sales for the year were $821,000 and analysis of previous bad debts indicates that 1.5% of net credit sales will prove uncollectable.

Required:

Prepare the necessary journal entry at 30 June 2015.

Identify the methods for accounting for bad debts and briefly explain how each works.

Solutions

Expert Solution

ekkarill92 answered 5 months ago

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