The accounting record of Barnaby Engineering Ltd at the end of 2013 financial year had
reported an Accounts Receivable balance of $85,000 (debit) and Provision for Doubtful
Debts of $700 (debit).Net credit sales for the year amounted to $350,000 and the credit
Sales Return and Allowances for the year was $45,000.In addition,the Provision for
Doubtful Debts has not yet been adjusted for 2013 financial year.
Required:
(a) At the end of 2013,the following Accounts Receivable were deemed to
be uncollectible:
Amoeba $ 8,750
Porkie $11,250
Total $20,000
Show the journal entry necessary to write off the above accounts.
(b) Assume that Barnaby Engineering Ltd uses the percentage of sales
method to estimate Doubtful Debts Expense and the management of
the firm decided to provide the Provision for Doubtful Debts for 2013 at
the rate of 0.5% of net credit sales.Show the journal entry to adjust the
Provision for Doubtful Debts.
(c) Ignore part (b) above and assume that Barnaby Engineering Ltd uses a
version of the ageing method that requires an allowance for doubtful
debts of 2% of the outstanding accounts receivable.Show the journal
entry to adjust the Provision for Doubtful Debts for 2013