QUESTION 2 - TASK 1 Doubtful debts net credit sales & ageing method (20 marks) Great Outdoors Ltd sells outdoor furniture settings on credit. The accounting records at 30 June 2019 reveal the following. Ignore GST Credit sales (for year) $1 450 000 Credit sales returns and allowances (for year) 90 000 Accounts receivable (balance 30 June 2019) 489 750 Allowance for doubtful debts (credit balance 30 June 2019) 6 750 In the past, the company's yearly bad debts 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: 9% estimated S estimated Balance uncollectable uncollectable Accounts not yet due $267 200 Accounts overdue:10-30 days 89 050 2 31-60 days 64 000 10 61-120 days 42 500 25 121 days and over 27 000 40 $489 750 Required A. Prepare the journal entries to adjust the Allowance for Doubtful Debts at 30 June 2015 under: 1. The net credit sales method 2. The ageing of accounts receivable method. B. Determine the balance in the Allowance for Doubtful Debts account under both methods. (Show in ledger 'T' account format) C. Assume that the allowance account had a debit balance of $2 850 at 30 June 2019. Show the journal entries to record the allowance for doubtful debts at 30 June 2019 under: 1. The net credit sales method 2. The ageing of accounts receivable method. D. Using the journal entries from requirement C, determine the balance in the allowance account under both methods. (Show in ledger 'T' account format) E. Explain, with reference to requirements B and D, why the two different methods result in different balances