The financial statements for the year ended 30 November 20X3 of Springboard Ltd included a provision for doubtful debts at that date of £900. During the year ended 30 November 20X4, the company received £500 from Peter Lyon towards the settlement of a debt of £700 that had been written off as irrecoverable by the company in 20X1. There is no evidence that Peter Lyon will be able to make any further payments to the company. Trade receivables at 30 November 20X4 amounted to £22,000, which includes the following debts:

.........................................................£

Mary Leof........................................800

Angus Way.......................................300

It has now been decided to write off these debts as bad.

In its financial statements for the year ended 30 November 20X4, the company is to continue its policy of maintaining a provision for doubtful debts of 5 per cent of trade receivables at the year end.

(Bad debts written off or recovered are not to be recorded in the provision for doubtful debts account.)

Required

a. Prepare the journal entry (or entries) in the books of the company necessitated by the receipt from Peter Lyon.

Notes:

1. Journal entries should include narratives.

2. For the purposes of this question, assume that cash receipts are journalized.

b. Prepare the provision for doubtful debts account in the books of the company for the year ended 30 November 20X4.

c. Show the entry for trade receivables which will be included in the statement of financial position as at 30 November 20X4 of the company.