BACT105 Business Accounting Week 9: - Tutorial Questions - Accounting for Receivables Question 1: Accounting for bad debts by the direct write-off and allowance methods On 31 May, Hilltop Floral Supply had a $155 000 debit balance in Accounts receivable and a $6 800 credit balance in Allowance for doubtful debts. During June, Hilltop made: a. Sales on credit, $545 000 (ignore cost of sales) b. Collections on account, $582 000 C. Write-offs of bad debts, $6 000. Requirements 1. Record sales and collections on account. Then record bad debts expense (1% of credit sales) and write-offs of customer accounts for June using the allowance method. Show all June activity in Accounts receivable, Allowance for doubtful debts and Bad debts expense (post to these T-accounts). 2. Suppose that Hilltop used a different method to account for bad debts. Record sales and collections on account. Then record bad debts expense for June using the direct write-off method. What additional journal entries are needed if Hilltop later collected the bad debt written-off in June? (Hint: the accountant first needs to re-instate the accounts receivable before recording the cash collection)

Question 1: Accounting for bad debts by the direct write-off and allowance methods On 31 May, Hilltop Floral Supply had a $155000 debit balance in Accounts receivable and a $6800 credit balance in Allowance for doubtful debts. During June, Hilltop made: a. Sales on credit, $545000 (ignore cost of sales) b. Collections on account, $582000 c. Write-offs of bad debts, $6000. Requirements 1. Record sales and collections on account. Then record bad debts expense ( 1% of credit. sales) and write-offs of customer accounts for June using the allowance method. Show all June activity in Accounts receivable, Allowance for doubtful debts and Bad debts expense (post to these T-accounts). 2. Suppose that Hilltop used a different method to account for bad debts. Record sales and collections on account. Then record bad debts expense for June using the direct write-off method. What additional journal entries are needed if Hilltop later collected the bad debt written-off in June? (Hint: the accountant first needs to re-instate the accounts receivable before recording the cash collection)