Reference no: EM133000341
The following transactions were completed by TAG Ltd during the current year ended 31 December.
21-Feb Received a cheque of $2,025 from Eagle Trading which has been written off last year as bad debt.
22-Feb Deposited the cheque from Eagle Trading into the company's bank account.
31-Mar Wrote off the $5,500 balance owed by Peacock Pte Ltd which has become bankrupt.
7-Jul Received 35% of the $8,800 balance owed by Hydro Ltd from its liquidator. Hydro Ltd has since been wound up by the liquidator.
29-Aug Reinstate the account of MT & Son which had been written off two years earlier as bad debt. Recorded the receipt of $1,200 cash in full payment.
31-Dec Wrote off the following accounts as bad debt: Bintan Trading, $10,050; Bright Photo Studio, $7,200; Milan Furniture, $3,775; Ocean Trading, $2,820. A review was done on the collectability of the accounts receivable on 31 December. Based on the analysis of the $787,550 balance of accounts receivable, it was estimated that $32,500 will be uncollectible. The allowance for bad debts has a credit balance of $30,000 at the beginning of the year, 1 January. The company uses the Allowance Method of accounting for doubtful debt.
Problem 1: Present the journal entries for the transactions above.
Problem 2: Journalise the adjusting entry. Show workings.
Problem 3: Determine the net realizable value of the accounts receivable as at 31 Dec.
Problem 4: Is the Allowance Method of accounting for doubtful debt better compared to the direct write-off method? Explain.
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