Reference no: EM133164687
Question - The following information relates to Hunter Ltd. At the end of the financial year on 30 June 2022, the following items require adjustment:
(a) Hunter Ltd rents surplus office space to an accounting firm. The accounting firm paid $96,000 on 1 September 2021 which covers their rent to the end of August 2022. Hunter Ltd uses a liability approach to record rent revenue.
(b) Hunter Ltd negotiated a loan of $500,000 from the Monash Bank. The funds were made available as from 1 May 2022. Simple interest (as yet unpaid) is charged at the rate of 12 per cent per annum.
(c) Hunter Ltd received an additional $94,000 in advance from customers on 29 June 2022. This money was recorded as revenue but none has been earned.
(d) The Accounts Receivable balance was $620,000 and the Allowance for Doubtful Debts account had a credit balance of $13,500 as at 30 June 2022.
A review of Accounts Receivables on 30 June 2022 revealed: Bad debts of $80,000 need to be written off.
The directors decided to allow for future bad debts equal to 3% of total Accounts Receivable.
Required - Prepare journal entries to record the necessary adjustments on 30 June 2022. Narrations are not required.