Summer Agricultural Supplies Ltd uses the net credit sales method for estimating doubtful debts. It is estimated that 2% of net credit sales will be uncollectable every month. On 1 June 2022, the Allowance for Doubtful Debt account has a credit balance of $2,100. Some additional information is also provided below.

5 June 2022 - After concerted effort to collect, an account receivable balance of $1,125 for Sufiya Ltd. was written off as a bad debt;

15 June 2022 - Sufiya Ltd. unexpectedly paid $875 of the debt previously written off on 5 June;

30 June 2022 - Prepare an adjusting journal for the allowance for doubtful debts. Sales for the month ending 30 June were $800,000, of which 25% are cash sales.

Requirements:

a) Record the journal entries for the above transactions, narrations are not required.

b) What is the balance in the Allowance for Doubtful Debt account as at 30 June 2022, show all calculations. What is the nature of this account and where is this account shown on the Financial Statements? 

c) If the business uses the aging method instead and the desired balance of Allowance for Doubtful Debts as at 30 June 2022 is $10,000. Prepare the journal entry for the Allowance for Doubtful Debts. 

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Answer rating: 100% (QA)

Answera Date General Journal Debit Credit June 30 2022 Bad Debt Expense 12000 Allowance for Doubtful Account 12000 To record bad debts expense estimat... View the full answer