E7.4 Prepare bank reconciliation statement and adjusting entries.

Shoe City Pty Ltds bank reconciliation clerk is unable to reconcile the bank balance at 31 January. The balance of the cash at bank account, before any entries for transactions initiated by the bank, was $4770.20 in the company records. The clerks attempt at the bank reconciliation statement is as follows:

Required

(a) Prepare a correct bank reconciliation.

(b) Journalise the entries required by the reconciliation.

E7.7Journalise the entries in October that pertain to the petty cash fund.

Determine bad debts expense, and prepare the adjusting entry.

Marc Pty Ltd has accounts receivable of $92 500 at 31 March 2019. An analysis of the accounts shows these amounts:

Credit terms are 2/7, n/30. At 31 March 2019 there is a $1600 credit balance in allowance for doubtful debts before adjustment. The entity uses the ageing of accounts receivable basis for estimating uncollectable accounts. Marc Pty Ltds estimates of bad debts are as follows:

Required

(a) Determine the total estimated uncollectables.

(b) Prepare the adjusting entry at 31 March 2019 to record bad debts expense.

(c) Discuss the implications of the changes in the ageing schedule from 2018 to 2019.

E7.8 Prepare journal entries for GST for bad debts expense.

Brian Bazaar had sold goods on credit in September 2019 for $5500 (including 10% GST). In November 2019 he became aware that the debtor M. Waters was bankrupt and the creditors were unlikely to receive any amounts due. On 28 November, the accountant for Brian Bazaar wrote the debt off against the allowance for bad debts account. Brian Bazaar uses the non-cash (accruals) basis for reporting and remitting the GST obligations.

Required

• (a) Prepare the journal entry to record the bad debt write-off.

• (b) Prepare a brief memo to the general manager explaining the effect of the bad debt write-off on the GST liabilities and the difference between reporting the GST on the cash and non-cash (accruals) basis in regard to bad debts.