Question 6

At 30 September, Zebra Mountain had Accounts Receivable of $28,000 and Allowance for Bad Debts of $1,000. During October, Zebra Mountain recorded:

• Sales of $180,000 ($160,000 on credit; $20,000 for cash)
• Collections on account, $130 000.
• Bad debt expense, estimated as 2% of credit sales
• Write-offs of bad debts, $ 1,200.

Required:

1. Journalise the above transactions during October.

2. Calculate the balance of accounts receivable and allowance for doubtful debts at the end of October and show how both accounts would appear in the financial statements.