Question
Prepare journal entries to adjust the Allowance for Doubtful Debts at 30 June 20X9 using the net credit sales method. Prepare journal entries to adjust
Prepare journal entries to adjust the Allowance for Doubtful Debts at 30 June 20X9 using the net credit sales method.
Prepare journal entries to adjust the Allowance for Doubtful Debts at 30 June 20X9 using the ageing of accounts receivable method.
Determine the balance in the Allowance for Doubtful Debts account under the net credit sales method.
Determine the balance in the Allowance for Doubtful Debts account under the ageing of accounts receivable method.
Credit Sales refer to therevenue earned by a company from its products or services, where the customer paid using credit rather than cash. JKL Limited (JKL) sells its products on credit. The table below presents the information relating to the selected accounts.
Table 1. Sales, A/R and Allowances for Doubtful Debts | |
Accounts receivable (balance 30 June 20X3) | 120 805 |
Allowance for doubtful debts (credit balance 1st July 20X2) | 555 |
Credit sales returns and allowances during the year | 33 300 |
Credit sales during the year | 395 900 |
In the past, the companys yearly bad debt expense had been estimated at 2% of net credit sales revenue. It was decided to compare the current method with an ageing of the accounts receivable method. The following analysis was obtained with respect to the accounts receivable.
Nature of A/R | Age | Balance | % of estimated uncollectable |
Not yet due | 64 972 | 0.50% | |
Overdue | 10-30 days | 22 570 | 02% |
31-60 days | 16 280 | 10% | |
61-120 days | 9 398 | 25% | |
121 days and over | 7 585 | 40% | |
120 805 |
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