Question:

1. Assume that instead of adjusting the allowance for doubtful debts based on net credit sales, the estimate of uncollectable accounts is based on an ageing of accounts receivable and that 5% of the accounts receivable as at 31 December 2020 was estimated to be uncollectable. Determine and prepare:

   I. the general journal entry to bring the allowance account to the desired balance, under aging of accounts receivable method.

   II. the expected net realisable value of the accounts receivable as at 31 December 2020. Use T accounts to demonstrate your workings.

Johanna owns Campus Fashion. From its inception, Campus Fashion has sold goods on 25% cash and the remaining on a 90-day credit basis. It is the company policy to use the allowance method to account for bad debts and the end of financial year is at 31 December By the end of August 2020, Campus Fashion had the following account balances in its ledge accounts: Credits Debits $270,556 Accounts Receivable Allowance for Doubtful Debt $12,300 15 During 2020, Campus Fashion's total sales revenue, inclusive of GST, were $921,800 of which $9,350 of the credit sales were returned due to defects. The following transactions has incurred between September to December 2020 (transactions are GST inclusive). Sep Wrote off as bad the accounts for Jamesin Co Ltd, $3,619 and F.Belows $5,033 Re-established the account of R.Simons and recorded the collection of $2,360 in full payment of his account which was previously written off as a bad debt. Received from EZY Outlet, 60% of the $2,265 owing. The balance remaining was written off as a bad debt. Received $1,529 from Shark Fashion in full payment of his account, which had been written off earlier as uncollectable. Estimated bad debts expense for the year to be 2% of net credit sales. 25 Nov 7 28 Dec 31 The company had collected $57,000 of accounts receivable, from 1 September to 31 December 2020