Peakhurst Limited had the following trial balance at 1 January 2016:

Debit $ Credit $

Cash 200 000

Accounts receivable600 000

Inventory 700 000

Prepaid insurance 60 000

Prepaid rent 50 000

Equipment 1 000 000

Allowance for doubtful debt 20 000

Accumulated depreciation 200 000

Accounts payable 500 000

Revenue received in advance 100 000

Income tax payable 500 000

Loan 570 000

Share capital 400 000

Retained profits 320 000

2 610 000 2 610 000

You are given the following additional information for the year ended 31 December 2016:

a) Bad debts of $8000 were written off.

b) It was decided that allowance for doubtful debts should be 4 per cent of accounts receivable.

Required:

1) Prepare journal entries for these transactions. (4 marks)

2) Show the T-ledger accounts for the following for the year ended 31 December 2016:

a) accounts receivable (2 marks)

b) allowance for doubtful debts (2 marks)

c) bad debts expense (2 marks)