Reference no: EM132466919

Centenary Ceramics deals in ceramic pots and figurines. All sales are conducted on a credit basis and are GST inclusive. No cash discounts are given.

The following information was extracted from the accounting records at 30 June 2019:

Sales                                       $607 200

Sales returns and allowances          41 690

Cash collected                            351 032

Debts to be written off                    4 424

Required

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

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

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

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

Question (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.

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

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

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