On 1 June 2020, Mason Ltd. had Accounts Receivable $424,778 and Allowance for Doubtful Debts accounts $6,050. Ignore GST. During June, the following transactions occurred: Revenue earned on credit, $597,500. Sales returns, $12,050. Accounts receivable collected, $700,000. Accounts written off as uncollectable, $5,926. Based on an ageing of accounts receivable on 30 June, the firm determined that the Allowance for Doubtful Debts account should have a credit balance of $6,750 on the balance sheet as at 30 June 2020. Ignore GST. Required: Prepare general journal entries to record the four transactions. Prepare journal entries to adjust the bad debts expense and allowance for doubtful debts account. Show how accounts receivable and the allowance for doubtful debts would appear on the balance sheet at 30 June 2020. On 10 July 2020, Kent Ltd, whose $1,300 account had been written off as uncollectable in June, paid its account in full. Prepare journal entries to record the collection.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
On 1 June 2020, Mason Ltd. had Accounts Receivable $424,778 and Allowance for Doubtful Debts accounts $6,050. Ignore GST.
During June, the following transactions occurred:
- Revenue earned on credit, $597,500.
- Sales returns, $12,050.
- Accounts receivable collected, $700,000.
- Accounts written off as uncollectable, $5,926.
Based on an ageing of accounts receivable on 30 June, the firm determined that the Allowance for Doubtful Debts account should have a credit balance of $6,750 on the balance sheet as at 30 June 2020. Ignore GST.
Required:
- Prepare general
journal entries to record the four transactions. - Prepare journal entries to adjust the
bad debts expense and allowance for doubtful debts account. - Show how accounts receivable and the allowance for doubtful debts would appear on the balance sheet at 30 June 2020.
- On 10 July 2020, Kent Ltd, whose $1,300 account had been written off as uncollectable in June, paid its account in full. Prepare journal entries to record the collection.
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