Question no. 1 Percent of sales method; write-off > At year-end (December 31), Rashed Company estimates its bad debts as 0.8% of its annual credit sales of AED975,000. Rashed records its bad debts expense for that estimate. > On the following March 15, Rashed decides that the AED1,250 account of A. Abdulla is uncollectible and writes it off as a bad debt. > On April 15, Abdulla unexpectedly pays the amount previously written off. Required: Prepare the journal entries of Rashed to record these transactions and events of December 31, March 15, and April 15. 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, 2018, it has outstanding accounts receivable of AED420,000, and it estimates that 2.5% will be uncollectible. Required: Prepare the adjusting entry to record bad debts expense for year 2018 under the assumption that the Allowance for Doubtful Accounts has (a) a AED2,000 credit balance before the adjustment and (b) a AED1,700 debit balance before the adjustment. |