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Explain what is the amount allocated to the allowance

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Reference no: EM132656943

The Roadrunner Company uses the allowance method for recording its uncollectible accounts. The company's net sales for year 2020 were Tk.2,800,000. As on December 31, 2020, Road Runner's accounts Receivable stood at Tk.1,600,000. Roadrunner has a carry over of Tk.4,500 credit balance in its allowance account.

Problem I. What is the amount allocated to the allowance in 2020 under the percentage-of-sales method if Roadrunner allocates 2 percent of its annual net sales to the allowance account? What is the balance in the allowance account after the allocation?

Problem II. What is the amount allocated to the allowance in 2020 under the percentage-of-receivables method if Roadrunner allocates 4 percent of its accounts receivable. to the allowance account? What is the balance in the allowance account after the allocation?

Problem III. Show the journal entry for allocating the funds under the percentage-of-receivable method. Assume that on February 7, 2021, Roadrunner wrote off the receivables account of Mr. B. M. Chowdhury, which had a balance of Tk.2,000. Later on March 4, 2021, Mr. B.M. Chowdhury repaid Tk.1,500. Show the journal entries for writing of Mr. B. M. Chowdhury's account and for the receipt of money from him on March 4.

Reference no: EM132656943

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