Question

Aged Receivables Max As at 31 March 2019 February January | December Older Current $1,726.00 $2,815.00 Amy Limited Rose Limited Yu Limited Edmonton Limited Henry Limited Kym Limited Suzy Limited Total Receivables $1,750.00 $2,127.00 $1,121.00 Total $1,726.00 $2,815.00 $1,750.00 $2,127.00 $1,121.00 $2,057.00 $1,552.00 $13,148.00 $2.057.00 $1,552.00 $1,552.00 $1,726.00 $4,998.00 $2,815.00 $2,057.00 Exert from Trial Balance Max As at 31 March 2019 Bank Accounts Receivable Less Allowance for Doubtful Debts 3,314 Accounts Receivable 13,148 GST Payable (1.000) 9.470 1,545 Max uses the Allowance method for doubtful debts and the accountant has determined the following uncollectable ratios Period Current February January December Older Estimated uncollectable percentage rates 1% 4% 10% 32% 54% Required: (a) Show the Journal entry to record the allowance for doubtful debts for 2019. Narrations are required and show your working (b) Rose Limited has just notified Max that it has gone into liquidation and will not be paying their invoice. Write the journal to record the invoice written off. Narrations are required

Answer 1

a. Balance required in Allowance for Doubtful Accounts = $ 1,726 x 0.01 + $ 4,998 x 0.04 + $ 2,815 x 0.10 + $ 2,057 x 0.32 + $ 1,552 x 0.54 = $ ( 17.26 + 199.92 + 281.50 + 658.24 + 838.08 ) = $ 1,995

Existing balance : $ 1,000.

Additional bad debt expense to be recognized = $ 995.

Date	Account Titles	Debit	Credit
		$	$
March 31, 2019	Bad Debt Expense	995
	Allowance for Doubtful Accounts		995
	Adjusting entry to record bad debt expense

b.

Date	Account Titles	Debit	Credit
		$	$
	Allowance for Doubtful Accounts	2,815
	Accounts Receivable		2,815
	To write off uncollectible accounts receivable

c.

Event	Account Titles	Debit	Credit
		$	$
1.	Accounts Receivable	2,000
	Allowance for Doubtful Accounts		2,000
	To reestablish accounts receivable previously written off
2	Cash	2,000
	Accounts Receivable		2,000
	To record collection of accounts receivable