Chapter+13+-+2009

Chapter+13+-+2009 - Exercise 13.2 Bad debts direct...

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Exercise 13.2 Bad debts – direct write-off and allowance methods (including GST) If GST is introduced the information extracted from the accounting records would be: Sales $552 000 37 900 Cash Collected ($319 120 + GST) 351 032 Bad Debts to be written off 4 022 Accounts Receivable written off ($4 022 + GST) 4 424 GST Collections (552 000 - $37 900) x 10% 51 410 A. 1. Bad Debts Expense $4 022 GST Collections (written back) 402 Accounts Receivable – xxx $4 424 (Bad debts written off using direct write-off method) 2. Bad Debts Expense $4022 – Income Statement 3. Accounts Receivable $210 054 – Current asset Net Sales [$552 000 - $37 900 + GST $51 410] – cash collected [$351 032] – debts written off [4 424] = $210 054 B. 1. Allowance for Doubtful Debts $4 022 GST Collections (written back) 402 Accounts Receivable – xxx $4 424 (Bad debts written off using allowance method) Bad Debts Expense 5 141 Allowance for Doubtful Debts 5 141 (Bad debts provided for 1% of net credit sales (excluding GST) 2. Bad Debts Expense $5 141 – Income Statement 3. Accounts Receivable $206 290 – Current Asset Net Sales [$552 000 - $37 900 + GST $51 410] – cash collected [$351 032] – debts written off $4 424 = $210 054 Deduct allowance for doubtful debts ($2 645 - $4 022 + $5141) = 3 764 $206 290 $183 180
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Exercise 13.3 Bad debts and financial statement disclosure A. Allowance for Doubtful Debts 2006 2005 30/6 Accounts Receivable $5 220 1/7 Balance $7 440 *Balance 8 148 30/6 Bad Debts Expense 5 928 $13 368 $13 368 2006 * (162 960 x 5%) 30/6 Balance $8 148 B. Income Statement for the year ended 30 June 2006 (extract) EXPENSES Bad debts expense $5 928 Balance Sheet as at 30 June 2006 (extract) CURRENT ASSETS Accounts receivable $162 960 Less allowance for doubtful debts 8 148 $154 812 2
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Exercise 13.4 Doubtful debts – net credit sales method A June 30 Bad Debts Expense $4 200 Allowance for Doubtful Debts $4 200 (Estimated bad debts expense) Oct 5 Allowance for Doubtful Debts 550 Accounts Receivable – G Greedy 550 (Wrote off G Greedy as uncollectable) Nov 15 Accounts Receivable – G Greedy 242 Bad Debts Recovered 242 (G Greedy recovered debt in part) Cash at Bank 242 Accounts Receivable – G Greedy 242 (Collected part payment in cash) B. Allowance for Doubtful Debts = Contra current asset – Balance Sheet balance $4 200 – 550 = $3 650 (shown as a deduction from accounts receivable) Bad Debts Recovered $242 = Income – Income Statement 3
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Exercise 13.5 Doubtful debts – ageing method A. Bad Debts Expense $10 380 Allowance for Doubtful Debts ($12 320 - $1 940) $10 380 (Increase Allowance for Doubtful Debts to $12 320) B. Bad Debts Expense $13 140 Allowance for Doubtful Debts $13 140 (Increase Allowance for Doubtful Debts from $820 debit to $12 300 credit) C. Allowance for Doubtful Debts
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Chapter+13+-+2009 - Exercise 13.2 Bad debts direct...

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