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At 30 June 2019, the trial balance of Shine Ltd contained the following amounts before adjustment. DebitsCredits Accounts receivable$350 000 Allowance for doubtful debts$ 1

At 30 June 2019, the trial balance of Shine Ltd contained the following amounts before adjustment.

DebitsCredits

Accounts receivable$350 000

Allowance for doubtful debts$ 1 500

Sales875 000

Required

  1. (a)Based on the information given which method of accounting for bad debts is Shine Ltd using the direct write-off method or the allowance method? How can you tell?
  2. (b)Prepare the adjusting entry at 30 June 2019 to record bad debts expense assuming that the ageing schedule indicates that $16 750 of accounts receivable will be uncollectable.
  3. (c)Repeat part (b) assuming that instead of a credit balance there is a $1500 debit balance in the allowance for doubtful debts.
  4. (d)During the next month, July 2019, a $4500 account receivable is written off as uncol- lectable. Prepare the journal entry to record the write-off.
  5. (e)Repeat part (d) assuming that Shine Ltd uses the direct write-off method instead of the allowance method in accounting for uncollectable accounts receivable.
  6. (f)What type of account is the allowance for doubtful debts? How does it affect how accounts receivable is reported on the statement of financial position at the end of the reporting period?

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