Lulus Lady Bugs Part (a) Doubtful Debts

Lulus Lady Bugs Ltd import and sell Giant ladybugs from Lululand. On 31 January, the business had the following balances in its accounts:

Debtors 50 000 Dr

Provision for doubtful debts 500 Cr

The firm has chosen its customers carefully, and has followed up slow payers. So far most customers are settling debts although some are overdue, and one debtor valued at $400 needs to be written off

After writing off this debt the credit manager carefully examined the amounts due and divided them into categories according to whether payment was overdue, and if it was, for how long.

Based on this analysis, and her experience in the industry, she estimated that 2% of the remaining of the debtors were unlikely to be collected.

Lulus Lady Bugs Part (b): Discounts

Selected transactions for January 2020 were:

Jan 1 Sold 20 ladybugs to Mr Apple for a total of $20 000 (before discount) on credit and the customer was offered a trade discount of 5% ($1 000). The lady bugs had cost $12 000

Jan 15 Mr Apple paid for the ladybugs purchased above

A trade discount - given to customers with an ongoing relationship with the organisation

Jan 22 Sold 10 ladybugs to Ms Leaf for a total of $10 000 on the terms 5/10 n/30. The ladybugs had cost $6 000

Jan 31 Ms Leaf paid for the ladybugs purchased on above. A term (or cash/settlement) discount - given as an incentive for debtors to pay quickly

Required: prepare journal entries to record the events described above