Question
E7.8 Brian Bazaar had sold goods on credit in September 2016 for $5500 (including 10% GST) and in November 2016 became aware that the debtor
E7.8 Brian Bazaar had sold goods on credit in September 2016 for $5500 (including
10% GST) and in November 2016 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 regards to bad debts.
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