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Week+8 - FINANCIAL ACCOUNTING(ACC1006S SUGGESTED SOLUTIONS...

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FINANCIAL ACCOUNTING (ACC1006S) SUGGESTED SOLUTIONS TUTORIALS HANDED IN ON 28 SEPTEMBER 2009 Tutorial 23 (solution) Adj B 005 1. DR Allowance for doubtful debts (-A)√ 4 800 CR Trade receivables (A) (½) 4 800 DR Bad debts expense √ 1 200 CR Trade receivables (A) (½) 1 200 6 000 – 4 800 √ 2. DR Bad debts expense √ 3 420 CR Allowance for doubtful debts(-A) √ 3 420 120 000 – 6 000 = 114 000 x 3% = 3 420 √ 3. The carrying value of the Trade receivables on the statement of financial position has to reduce as it is no longer probable that 3% of the outstanding debtors at year- end will pay us√. The business cannot decrease trade receivables as a specific debtor has, as yet, not gone bad √. The business credits an asset account - allowance for doubtful debts that will decrease the carrying value of Trade receivables amount that is disclosed on the statement of financial position. √ 4. DR Insurance expense √ 31 250 CR Prepaid insurance (A) √ 31 250 Used: 18 000 x 8/12 = 12 000 √ 1 750 x 11 = 19 250 √ TUTORIAL 26 INV A 002 a. (12 marks) Transaction 3: No entry (1). The goods were shipped FOB Destination Point. The risks and rewards of ownership will only transfer from the seller (Vampire) to the purchaser (Slinger) once they have reached the Cape Town Harbour (1). Page 1 of 4
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Transaction 6: Dr Trade Receivables (A) (1) 59 800 (½) Dr Commission expense (1) 5 200 (½) Cr Sales income (1) 65 000 65 000 x 8% = R59 800 Dr
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