Centenary Ceramics deals in ceramic pots and figurines. All sales are conducted on a credit basis and

Question:

Centenary Ceramics deals in ceramic pots and figurines. All sales are conducted on a credit basis and no cash discounts are given. Ignore GST. The following information was extracted from the accounting records at 30 June 2015:

Sales

Sales returns and allowances

Cash collected

Debts to be written off

$552 000

37 900

319 120

4 022

Required

A. Assume that Centenary Ceramics uses the direct write-off method of accounting for bad debts:

1. Show the general journal entry required to write-off the bad debts.

2. What amount would be shown for bad debts expense in the income statement at 30 June 2015?

3. What amount would be shown for accounts receivable in the balance sheet at 30 June 2015?

B. Assume that Centenary Ceramics uses the allowance method of accounting for bad debts and the Allowance for Doubtful Debts account had a credit balance of $2645 at 1 July 2014. Also assume that an allowance of 1% of net credit sales is required at 30 June 2015 (ignore GST):

1. Show the general journal entries required to write off the bad debts and bring in the required allowance for doubtful debts.

2. What amount would be shown for bad debts expense in the income statement at 30 June 2015?

3. What amount would be shown for accounts receivable in the balance sheet at 30 June 2015?

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

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