Reference no: EM13504725

Mira Maz loves decorating and set up her own business a few years ago; Mira's Decorating Touches. The business is registered for GST, and has a 30 September year-end date.

The business is doing very well lately and Mira no longer has time to manage the books. She has approached you as her friend, and chartered accountant, to help her prepare her financial statements. Mira has provided you with her adjusted ledger balance as at 30 September 2012, as follows:

 

Account	Adjusted
Accounts payable	$36 036
Accounts receivable	102 528
Accumulated depreciation - delivery equipment	37 440
Accumulated depreciation - furniture and fixtures	21 216
Advertising expense	35 880
Cash at bank	35 688
Cost of sales	549 744
Delivery equipment	62 400
Depreciation expense - delivery equipment	12 480
Depreciation expense - furniture and fixtures	5 304
Discount allowed	9 048
Discount received	11 232
Electricity expense	13 344
Freight inwards	12 480
Freight outwards	24 336
Furniture and fixtures	53 040
GST Collections	94 817
GST Outlays	67 205
Insurance expense	3 744
Inventory	187 200
Loan payable	156 000
Mira Maz, Capital	162 552
Mira Maz, Drawings	37 440
Office Supplies expense	2 496
Office Supplies on hand	1 872
Prepaid insurance	2 808
Rent expense	38 064
Salaries expense	140 784
Salaries payable	4 680
Sales revenue	961 400
Sales returns and allowances	13 232

 

Required:

1)      Mira is keen to see the balance of her capital account, and asks you to prepare the narrative Balance Sheet as at 30 September 2012.

2)      When you review the Balance Sheet, you notice Mira has not accounted for any doubtful debts. You advise her to provide you with an ageing analysis of her debtors. She provides you with the following analysis, but has not completed the last column:

	Accounts Receivable Balance	% estimated uncollectable	Estimated bad debts
Accounts not yet due	$38 600	5
Accounts overdue:     10 - 30 days	12 378	10
31 - 60 days	10 150	20
61 - 120 days	6 400	35
121 days and over	35 000	85
	$102 528

2a) Complete the last column, in the table above, showing all calculations below and round to the two decimal places. 

2b) Prepare the journal entry to establish the Allowance for doubtful debts account, in accordance with your calculations in the last column from the table above. Narrationsare not required. 

 

Date	Account	Debit	Credit

 

2c)  On inspection of correspondence with debtors, it was determined that amounts due from customers totaling $33 000 must be written-off as uncollectable. Record the journal entry to reflect this. Narrations are not required. 

 

Date	Account	Debit	Credit

 

2d) The following day, Mira rings you to tell you that she received a cheque for $18 700, as payment in full for one of the accounts that had been written off as uncollectable. Record the journal entries to record the transaction. Narrations are not required.