Reference no: EM132690852

Venezuela Ltd sells outdoor furniture. The company is not registered for GST. The accounting records at 30 June 2020 reveal the following balances:
$
Credit sales (for year) 1,070,000
Credit sales returns & allowances 90,000
Accounts receivable 323,500
Allowance for doubtful debts (credit balance) 1,500

In the past, the company's yearly bad debts expense had been estimated at 2% of credit sales. It was decided to compare that method with an ageing of the accounts receivable method. The following analysis was obtained in relation to the accounts receivable:

                                                                  % estimate
                                          Balance           uncollectable
Accounts not yet due       $173,600                  1.5
Accounts overdue: 10-30 days 60,000                   3
31-60 days                         42,000                       10
61-120 days                          26,400                      25
121 days and over                     21,500                     40
                                           323,500

Required:

Prepare journal entries for the following (ignore narrations):

Question 1. Write off $550 owing from J. Brooks as uncollectible.

Question 2. Record collection of $1,500 in full settlement of J. Fuller's account, previously written off.

Question 3. Received 40% of the $900 balance owing by W. Chan and wrote off the remainder as uncollectible.

Question 4. Assume the business uses the percentage of sales method to estimate uncollectible accounts, prepare the journal entry for the year ended 30 June 2020.

Question 5. Show how Accounts Receivable would be reported in the balance sheet at 30 June 2020.

Question 6. Assume the same facts except that instead of using the percentage of sales method to estimate uncollectible accounts, the business uses the ageing method. Prepare the journal entry for the year ended 30 June 2020 (show workings).