Reference no: EM132562069

Question - Peakhurst Limited had the following trial balance at 1 January 2016:

	Debit $	Credit $
Cash	200 000
Accounts receivable	600 000
Inventory	700 000
Prepaid insurance	60 000
Prepaid rent	50 000
Equipment	1 000 000
Allowance for doubtful debt		20 000
Accumulated depreciation		200 000
Accounts payable		500 000
Revenue received in advance		100 000
Income tax payable		500 000
Loan		570 000
Share capital		400 000
Retained profits		320 000
	2 610 000	2 610 000

You are given the following additional information for the year ended 31 December 2016:

a) Bad debts of $8000 were written off.

b) It was decided that allowance for doubtful debts should be 4 per cent of accounts receivable.

Required -

1) Prepare journal entries for these transactions.

2) Show the T-ledger accounts for the following for the year ended 31 December 2016:

a) accounts receivable

b) allowance for doubtful debts

c) bad debts expense