a) On 1 October 2021, Alpha Ltd had debit balance in the Accounts Receivable of $650,250 and credit balance in the Allowance for Doubtful Debts account amounting to $11,150. Ignore GST. The following transactions occurred during the month of October 2021:

1. Fees earned on credit, $830,000.

2. Fees refunded, $2,500.

3. Accounts receivable collected, $240,000.

4. Accounts written off as uncollectable, $2,340.

Based on an ageing of accounts receivable on 31 October 2021, the firm decided that the Allowance for Doubtful Debts account should have a credit balance of $11,200 on the Statement of Financial Position as at 31 October 2021.

Required:

i) Prepare general journal entries to record the four transactions above for the month of October 2021 and to adjust the Allowance for Doubtful Debts account to the required level. (4 marks)

ii) Show how accounts receivable and the Allowance for Doubtful Debts would appear on the Statement of Financial Position at 31 October 2021. (2 marks)

iii) On 30 October 2021, Samuels, whose $5,430 account had been written off as uncollectable back in July, paid their account in full. Prepare general journal entries to record the collection. (2 marks)

b) Labroy Marine adjusted its Provision for Warranties as at 31 March 2021 so that it would be equal to 6% of sales for the year ended on that date. Sales for the financial year ended 31 March 2021 were $625,000 and the Provision for Warranties before the adjustment was $32,000. On 15 May 2021, a successful claim for warranty on faulty products to the cost of $4,200 was made on Labroy Marine.

Required:

i) Prepare the general journal entry at 31 March 2021 to adjust the Provision for Warranties to the required level. (2 marks)

ii) Record the payment of the warranty claim on 15 May 2021 in general journal format. (2 marks)

c) Discuss why control of receivables is just as important as control of cash. (3 marks)