Question
The accountant for The Earths Pty Ltd prepared an ageing analysis of accounts receivable balances at 30 June 2016 as set out below. The percentages
The accountant for The Earths Pty Ltd prepared an ageing analysis of accounts receivable balances at 30 June 2016 as set out below. The percentages of each age group estimated to be uncollectable are based on past experience and are shown next to the aged balances.
The company is registered for GST.
The company uses the allowance method to account for bad debts. On 30 June 2016 the credit balance of the Allowance for Doubtful Debts account is $3150 before any adjustments.
Age | Estimated uncollectable (%) |
| Balance |
Current 3060 days overdue 61120 days overdue 121 days to 6 months overdue Over 6 months overdue | 0.5 2.0 10 20 40 |
| 346 500 99 000 24 750 29 700 19 800 |
|
|
| 519 750 |
.
(Use whole numbers for all journals)
Required:
A. Prepare the general journal adjusting entry for estimated bad debts on 30 June 2016.
B. Give the entry to write off the account of R. Clark in August 2016, $1650.
C. The following transactions relate to The Earth business of Penny Hall. The balance in the Allowance for Doubtful Debts account on 1 July 2015 was $7440. Bad debts written off during the year ended 30 June 2016 amounted to $5220. Debtors balances on 30 June 2016 after the bad debts had been written off total $162 960, and a new allowance of 5% of debtors is required. (Ignore GST for the purposes of this exercise.)
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