The following information relates to the business of David & Sons Company. The financial year of the company ends at 30 June 2022.

Opening balance of Account Receivables $22 200

Opening balance of the Allowances for Doubtful Debts 2 820

Closing Balance of Account Receivables 28 860

Net credit sales during the year 78 000

During the year, $2 160 of account receivables were written off as bad debts. David & Sons Company uses the net credit sales method to estimate doubtful debts. It is estimated that three per cent of the net credit sales will become uncollectable. Ignore GST.

Required:

a) Prepare the following accounts (T-account) at the end of 2022 (7 marks)

1) Account Receivables

2) Allowances for Doubtful Debts

b) Show how the above information appears in the Income Statement and the Balance Sheet of the company at the end of the financial year