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Question no. 1 (a) DIRECT WRITE-OFF METHOD -On February 10, 2020, Ahmed decides that the AED1,980 account of A. Ayesha is uncollectible and writes
Question no. 1 (a) DIRECT WRITE-OFF METHOD -On February 10, 2020, Ahmed decides that the AED1,980 account of A. Ayesha is uncollectible and writes it off as a bad debt. On April 30th 2020, Abdulla unexpectedly pays the amount previously written off. Required: Record the journal entries about the above transactions. Question no. 1 (b) Percent of sales method; At year-end (December 31), Rashed Company estimates its bad debts as 0.75% of its annual credit sales of AED790,000. Rashed records its bad debts expense for that estimate. On the following February 15, Rashed decides that the AED1,250 account of A. Abdulla is uncollectible and writes it off as a bad debt. On March 31, Abdulla unexpectedly pays the amount previously written off. Required: Prepare the journal entries of Rashed to record these transactions and events of December 31, February 15, and March 31st. Question no. 2 Percent of accounts receivable method At each calendar year-end, Futaim Electric Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2019, it has outstanding accounts receivable of AED310,000, and it estimates that 2.5% will be uncollectible. Required: Prepare the adjusting entry to record bad debts expense for year 2019 under the assumption that the Allowance for Doubtful Accounts has (a) a AED2,400 credit balance before the adjustment and (b) a AED1,800 debit balance before the adjustment.
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