Question 1
The following transactions relate to the business of Penrith Produce Ltd. Ignore GST.
June 30 Based on past experience, it was estimated that 1% of the year’s net credit sales revenue of $330 000 will not be collected, and an allowance for doubtful debts was established.
Oct. 5 After a concerted effort to collect, an account receivable of $550 from M. McGrathwas written off as a bad debt.
Nov. 15 M. McGrath unexpectedly paid $242 of the amount of his debt written off on 5 October.
Required
- Record the transactions in general journal form.
- What is the balance in the Allowance for Doubtful Debts accounts and the Bad Debts Recovered account? Where are these accounts shown on the financial statements?
Question 2
On 30 June, the end of its financial year, Burnside Consulting completed an age analysis of its accounts receivable and determined that an allowance for doubtful debts of $12,320 was needed in order to report accounts receivable at their estimated collectable amount in the balance sheet. Ignore GST.
Required
- Prepare the entry to record bad debts expense assuming that the Allowance for Doubtful Debts account currently has a $1940 credit balance.
- Prepare the entry to record bad debts expense assuming that the Allowance for Doubtful Debts account currently has a $820 debit balance.
- Prepare the entry to write off an account receivable from G. Smith for $781.
- Assume that before the entry recorded in requirement C above, the net amount of accounts receivable was $99 000. What is the net amount receivable from accounts receivable after recording the write-off of Smith’s account? Explain.
Question 3
The following information relates to the cash position of Carl Frasier, loan broker.
- Cash at Bank account balance as at 30 June 2019: $45 466 debit.
- Bank statement balance as at 30 June 2019: $47 512 credit.
- 30 June receipts amounting to $1830 have not been deposited.
- Cheques issued but not presented total $3468.
- A $312 cheque was returned marked ‘dishonoured’. The cheque had been received from J. Simms, a new customer.
- A $750 deposit made by L. Richards was incorrectly credited to the bank account of Carl Frasier.
- The bank statement shows that the bank has charged the business’s account with fees and charges of $30.
- Items 4, 5, and 6 have not yet been entered in the cash journals.