Reference no: EM132966829

Tarragon 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):

Problem 1. Write off $550 owing from B. Crook as uncollectible.

Problem 2. Record collection of $1,500 in full settlement of D. Runner's account, previously written off.

Problem 3. Received 40% of the $900 balance owing by N. Money and wrote off the remainder as uncollectible.

Problem 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.

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

Problem 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).