Question

On 1 June, Mason and Boyce had Accounts Receivable and Allowance for Doubtful Debts accounts as below. Ignore GST.

accounts recievables

1/6 balance 849,555
	allowance for doubtful debts
	1/6 balance 12.100

During June, the following transactions occurred:

1. Revenue earned on credit, $1,195,000

. 2. Sales returns, $24,100.

3. Accounts receivable collected, $1,400,000

. 4. Accounts written off as uncollectable, $15,851.

Based on an ageing of accounts receivable on 30 June, the firm determined that the Allowance for Doubtful Debts account should have a credit balance of $13,500 on the balance sheet as at 30 June. Ignore GST.

Required:

(a) Prepare general journal entries to record the four transactions and to adjust the Allowance for Doubtful Debts account.

(b) Show how accounts receivable and the allowance for doubtful debts would appear on the balance sheet at 30 June.

(c) On 29 June, Kim Ltd, whose $2,400 account had been written off as uncollectable in June, paid its account in full. Prepare journal entries to record the collection.

Answer 1

(a)

Account Titles	Debit	Credit
Accounts Receivable	$    1,195,000
Sales Revenue		$    1,195,000
Sales Returns and Allowances	$          24,100
Accounts Receivable		$          24,100
Cash	$    1,400,000
Accounts Receivable		$    1,400,000
Allowance for Doubtful Debts	$          15,851
Accounts Receivable		$          15,851
Bad Debt Expense	$          17,251
Allowance for Doubtful Debts		$          17,251

Bad Debt Expense = $13500-(12100-15851)

(b)

Current Assets
Accounts Receivable	$        604,604
Less Allowance for Doubtful Debts	$        (13,500)	$       591,104

(c)

Account Titles	Debit	Credit
Accounts Receivable	$            2,400
Allowance for Doubtful Debts		$            2,400
Cash	$            2,400
Accounts Receivable		$            2,400