Reference no: EM132363508

Question :

Johanna owns Campus Fashion. From its inception Campus Fashion has sold goods ot5 25% cash and the remaining on a 90 day credit basis. At 31 December 2018, the trial balance of Campus Fashion contained the following amounts before any adjustments;

                                                       Debits    Credits
Allowance for Doubtful Debts                 2310
Sales Revenue                                                 796500
Credit Sales Return and Allowances          43,200

The beginning balance of Accounts Receivable at 1 January 2018 was $563,000 and Johanna had collected1590,01 from credit sales during 2018. The following Accounts Receivable were deemed uncollectible during 2018:

Simon Fashion $14,316
Gleason Footwear $12,384

Required:

1) Based on the information given, provide the general journal entry required to write off the bad debts.

2) Johanna currently estimates the bad debts expense based o Of net credit sales revenue. She has decided to compare the current method with an ageing method of the accounts receivable method. Johanna after analysing industry averages and prior year's activities, she has determined that an Allowance-for Doubtful Debt 41 Piwof -the outstanding accounts receivable is required.

a. Prepare the general journal entry to adjust the Allowance for Doubtful Debts at 31 December 2018 under (Show your workings);

i. The net credit sales method

ii. The aging of accounts receivable method

b. Determine the balance in the Allowance for Doubtful Debts account under both methods (Show your workings)