Question 8 On 31 Dec, Blue Ocean Pte Ltd's unadjusted trial balance includes the following items:...
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Question 8 On 31 Dec, Blue Ocean Pte Ltd's unadjusted trial balance includes the following items: Accounts Receivables Allowance For Doubtful Accounts $210,000 debit $2,500 credit There was objective evidence that 15% of a $20,000 debt owed by a debtor, Red Sea Logistics, would most probably be uncollectible. An aging analysis of the rest of the accounts receivables indicated that an estimated 5% of these accounts would not be collectible. The company uses the allowance method to value its accounts receivable. Question 8a Present the adjusting entry to record Bad Debt Expenses. Show narration and workings. Question 8b (9 marks) Explain why using the allowance method is better than the direct write-off method. (2 marks) Question 8 On 31 Dec, Blue Ocean Pte Ltd's unadjusted trial balance includes the following items: Accounts Receivables Allowance For Doubtful Accounts $210,000 debit $2,500 credit There was objective evidence that 15% of a $20,000 debt owed by a debtor, Red Sea Logistics, would most probably be uncollectible. An aging analysis of the rest of the accounts receivables indicated that an estimated 5% of these accounts would not be collectible. The company uses the allowance method to value its accounts receivable. Question 8a Present the adjusting entry to record Bad Debt Expenses. Show narration and workings. Question 8b (9 marks) Explain why using the allowance method is better than the direct write-off method. (2 marks)
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