Question
Garcia Pty Ltd has accounts receivable of $92 500 at 31 March 2010. An analysis of the accounts shows these amounts: Balance, 31 March Month
Garcia Pty Ltd has accounts receivable of $92 500 at 31 March 2010. An analysis of the accounts shows these amounts: Balance, 31 March Month of sale 2010 2009 March $65 000 $75 000 February 12 600 8 000 December and January 8 500 2 400 November and October 6 400 1 100 $92 500 $86 500 Credit terms are 2/7, n/30. At 31 March 2010 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. Garcia Pty Ltd's estimates of bad debts are as follows: Age of accounts Estimated percentage* uncollectable Current 2.0% 130 days past due 5.0 3190 days past due 30.0 Over 90 days 50.0 Required (a) Determine the total estimated uncollectables. (b) Prepare the adjusting entry at 31 March 2010 to record bad debts expense. (c) Discuss the implications of the changes in the ageing schedule from 2009 to 2010. u
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