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Ballarat Pty Ltd owes Churchill Ltd an amount of $50,000 as at 30 June 2021. This date is the end of the reporting period for
Ballarat Pty Ltd owes Churchill Ltd an amount of $50,000 as at 30 June 2021. This date is the end of the reporting period for Churchill Ltd. On 20 July 2021 Churchill Ltd received correspondence from ABC liquidators advising of the bankruptcy of Ballarat Pty Ltd. The correspondence advised Churchill Ltd that Ballarat Pty Ltd had ceased trading in June 2021 and that a liquidation pay-out of only 10 cents in the dollar will be provided.
Provide the following:
- Discuss how the above transaction should be treated.
- Provide the journal entry for Churchill Ltd to account for this transaction.
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