Reference no: EM132360184

Question

Sales 552 000

Sales return and allowance 37 900

Cash collected 319 120

Debts to be written off 4022

(a) Assume that Centenary Ceramics uses the direct write-off method of accounting for bad debts.

i. Show the general journal entry required to write-off the bad debts.

ii. What amount would be shown for bad debts expense in the income statement at 30 June 2019?

iii. What amount would be shown for accounts receivable in the balance sheet at 30 June 2019?

(b) Assume that Centenary Ceramics uses the allowance method of accounting for bad debts and the Allowance for Doubtful Debts account had a credit balance of $2645 at 1 July 2018. Also assume that an allowance of 1% of net credit sales is required at 30 June 2019 (ignore GST).

i. Show the general journal entries required to write off the bad debts and bring in the required allowance for doubtful debts.

ii. What amount would be shown for bad debts expense in the income statement at 30 June 2019?

iii. What amount would be shown for accounts receivable in the balance sheet at 30 June 2019?

The following transactions relate to the gardening maintenance business of Steve Jones. The balance in the Allowance for Doubtful Debts account on 1 July 2018 was a credit balance of $7440. The bad debts written-off during the year ended 30 June 2019 amounted to $5220. Accounts receivable balances on 30 June 2019 after the bad debts had been written off total $162 960, and a new allowance of 5% of debtors is required. (Ignore GST for the purposes of this exercise.)

Required

(a) Prepare a balance the Allowance for Doubtful Debts accounts for the year to 30 June 2019.

(b) Show how the above information would be disclosed in:

i. the income statement for the year ended 30 June 2019.

ii. the balance sheet as at 30 June 2019