Reference no: EM132995729
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.
Required:
Problem (a) Present the journal entries for the transactions above.
Problem (b) Journalise the adjusting entry. Show workings.
Problem (c) Determine the net realizable value of the accounts receivable as at 31 Dec.
Problem (d) Is the Allowance Method of accounting for doubtful debt better compared to the direct write-off method? Explain.
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