After the first year of operations Island Inn Bed and Breakfast had made $15,000 in credit sales.

Fantastic news! We've Found the answer you've been seeking!

Question:

After the first year of operations Island Inn Bed and Breakfast had made $15,000 in credit sales. The following debtors have been outstanding for nine (9) months or more.

November 15, 2018 Crank and Hank Insurance Corp. $700.00

December 9, 2018 G. I. Joe $1,500.00

January 15, 2019 EWQ Holdings $200.00

(A) It has been decided to write off these amounts. Show the journal entries which would write off these amounts in Island Inn Bed and Breakfast’s books.

(B) As a result of debtors defaulting on payments, Island Inn Bed and Breakfast has decided to make an annual provision of $5,000 to reduce the effect of bad debts. Show the journal entries which would record the annual provision.

(C) At the end of March 2019, Island Inn Bed and Breakfast is unable to collect on debtor G.I.Joe’s debt against the annual provision.