On 1 January 20XX, TERRIER Ltd has $460,000 of accounts receivable. TERRIER Ltd uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful accounts of $22,000. 

During the year, the following transactions took place: 

i) Sold $1,380,000 of goods were sold to customers on credit. 

ii) Received $1,250,000 cash from accounts receivable. 

iii) Wrote off $10,500 from a debtor/account receivable who went bankrupt. 

iv) The management estimated that 10% of accounts receivable will be uncollectible. 

Required: 

a) Update the accounts receivable balance. 

b) Update the allowance for doubtful account balance. 

c) Explain the advantages of using the allowance method of accounting for bad debts. 

Answer rating: 100% (QA)

a The updated accounts receivable balance can be calculated as follows Beginning balance 460000 Add Goods sold on credit 1380000 Less Cash received fr... View the full answer