ACC 305 Lecture Notes - Lecture 58: Accounts Receivable, Income Statement
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Adham Sdn. Bhd. accounts for its uncollectible accounts usingthe allowance method. The company reported the following accountbalances at 31 December 2017.
RM | |
Accounts receivable | 250,000 |
Less: Allowance for doubtful accounts | 12,500 |
During the year 2017, the company had the following transactionsrelated to receivables.
RM | |
1.Credit sales | 600,000 |
3.Collections of accounts receivable | 680,000 |
4.Write-offs of accounts receivable | 10,800 |
5.Recovery of bad debts previously written off | 3,000 |
Required:
a) Journalise transactions 1 - 5 above.
b) Post the entries to the two accounts: Accounts receivable andAllowance for doubtful account.
c) Record the bad debt expense for 2017 (in T-account) undereach of the following independent assumptions:
i. The company estimates its bad debt expense based on 5% ofoutstanding account receivable balance.
ii. The company bad debt estimate is 1% of its credit sales.
d) What is the net realisable value of Accounts Receivable at 31December 2017 under assumption (i) above.
Prior to the year-end adjustment to record bad debt expense for2014 the general ledger of Muntjac Company included the followingaccounts and balances:
Allowance for Doubtful Accounts | $ 8,000 |
Bad Debt Expense | 0 |
Accounts Receivable | 75,000 |
Cash collections on accounts receivable during 2014 amounted to$250,000. Sales revenue during 2014 amounted to $600,000, of which50% was on credit, and it was estimated that 2% of these creditsales made in 2014 would ultimately become uncollectible.
Required:
A. Calculate the bad debt expense for 2014.
B. Determine the adjusted 2014 year-end balance of the allowancefor doubtful accounts.
C. Determine the net realizable value of accounts receivable forthe December 31, 2014 balance sheet.
You must include your calculations.