7.5At 31 December 20X5 Bayre’s accountant persuaded him, for the first time, to provide for doubtful debts in his accounts. At that date, debtors owed Bayre £15,000. A provision •against doubtful debts amounting to 5 per cent of debtors was set up and appeared in the financial statements for the year ended 31 December 20X5.

The following figures relate to the years ended 31 December 20X6 and 20X7.

20X6 20X7

£ * £

Sales ’ 190,000 200,000 Cash received from customers 172,000 205,000 Bad debts written off 1,600 500 Cash received in respect of a bad debt 300 written off in 20X6 (in addition to amount stated above)

Required:

(a) Prepare Bayre’s bad debts expense account and provision against doubtful debts account for the years ended 31 December 20X6 and 20X7.

(b) Prepare extracts from the balance sheets and profit and loss accounts for the years ended 31 December 20X6 and 20X7, showing the treatment of all relevant figures.