ACCOUNTING

QUESTION 3 (20 MARKS) Ignore VAT Joe's Hardware Lid. is a company which manufactures ice-cream squirrels for children's parties and hot air balloon trips. The company accountant, Miss A. Thompson, is in the process of preparing the debtors reconciliation for the month of May X7. The following information is available to her. . Trade receivables (30/04/X7): (This balance is net of a 5% allowance for doubtful debts) R51 490 . Total column of the sales journal: R27 800 . Trade receivables column in the Cash Receipts Journal: R31 546 . Credit sales returns for the month: R4 500 . Closing Balance on the Debtor's List R37 400 . Early in May a decision was taken to write off a debtor, A. Palmer, as bad Palmer, a known gambler, who went missing after a high stakes poker game. had purchased goods to the value of R3 500 in the previous month. On the 31" of May, another debtor, N. Meier was declared insolvent. Reliable estimates from the executor indicate that creditors will be able to recover 16g in the rand. The outstanding balance on his account was R5 600. . On the last day of the month a cheque was received from A. Palmer in full payment of his outstanding balance. As it turned out, he had been in Europe betting on football. When comparing the Debtors ledger with the general ledger. Miss Thompson identified the following errors; 1. The balance of F. Stevens account in the Debtors Ledger was overstated by R400 (The balance was correctly reflected in the general ledger) 2. A credit sale to J. van Aswegen's account was incorrectly recorded in L. van Schoors' account in the Debtors ledger. A credit sale to a customer. J. Spurdle was incorrectly accounted for in the company books. The sale was for R7 500, and Miss Spurdle was offered a 10% trade discount for her bulk purchase. The sale was recorded as follows in the General Ledger: Dr Trade receivables R7 500 Cr Sales R7 500 The transaction was correctly dealt with in the Debtors Ledger. Joes' Hardware maintains their allowance for doubtful debts at 5% of the outstanding Trade receivables balance at month end You are required to: a) Prepare the trade receivables account in the general ledger b) Prepare the account of Mr Palmer in the debtors ledger (10 marks) c) Prepare ALL the entries in the General Journal with regards to Bad Debts and allowance for doubtful debts (4 marks) (6 marks)