Reference no: EM132694176
Question -
A. J & B Company uses the percentage of sales approach to estimate its uncollectible accounts. The company's annual sales for its first financial year of operations ending July 31, 2020 was $500,000, cash sales contributed to 2% of the overall sales and the accounts receivable balance at year end was $75,000. Based on industry expectations, it estimated that 3% of its credit sales would be uncollectible.
Required:
a. Calculate the bad debt expense at July 31, 2020.
b. Calculate the net receivable balance that would be reported in the Statement of Financial Position as at July 31, 2020.
B. Tosh and Sons Inc. uses the percentage of receivables approach to estimate its uncollectible accounts. The company had sales of $100,000 at the end of its financial year on June 30, 2020. The allowance for doubtful debts account had a debit balance of $400, the accounts receivable balance was $30,000at year end and the company estimates the uncollectible percentages as follows:
|
Current (1 - 30 days)
|
$15,000
|
0.5%
|
|
31 - 60 days
|
$10,000
|
2.0%
|
|
61 - 90 days
|
$3,000
|
10.0%
|
|
Over 90 days
|
$2000
|
60.0%
|
Required:
a. Calculate the bad debt expense at June 30, 2020.
b. show the necessary journal entry to record the bad debt expense for the year.
b. During the financial year ending May 31, 2020 the Board of Directors of Chung Sa Corporation authorized the write off of a $3,000 two-year debt belonging to a previous customer Jap Inc. On July 2, 2020 Chung Sa Corporation received an electronic funds transfer from Jap Inc. in the amount of $3,000.
Required: Show the necessary journal entries to record this transaction.