Reference no: EM132580064
Presented below is an ageing schedule for Emerald Ltd. Emerald Ltd is not currently registered for GST.
Number of days past due
Customer Total Not yet due 1-30 31-60 61-90 Over 90
Anders $20,000 $ 9,000 $ 11,000
Baietto 30,000 $30,000
Cyrs 50,000 15,000 5,000 $30,000
Dejong 14,000 $14,000
Others 126,000 92,000 15,000 13,000 6,000
Total 240,000 137,000 29,000 24,000 30,000 20,000
Emerald Ltd estimates of bad debts are as follows:
Age of Account Estimated % uncollectable
Not yet due 2%
1-30 days past due 5%
31-60 days past due 10%
61-90 days past due 24%
Over 90 days 50%
As at 30 June 2018, the unadjusted balance in the Allowance for Doubtful Debts is $8,000 credit.
Required:
Prepare general journal entries as required below. Ignore narrations for all journal entries.
Question i) Prepare the adjusting entry for estimated uncollectible accounts at 30 June 2018. Show all workings.
Question ii) An extract from the balance sheet of Emerald Ltd at 30 June 2018 showing how Accounts Receivable would be reported.
Question iii) Emerald Ltd was notified by a legal firm on 15th September 2018 that Dejong was bankrupt and could not pay his account. Prepare the journal entry to write off this account
Question iv) On 15th November 2018, a cheque for $10,000 was received from Dejong as part payment of the amount due. No further payment is expected. Prepare the journal entry for this payment.
Question v) Prepare the adjusting journal entry for estimated uncollectible accounts at 30 June 2018 if Emerald Ltd uses the percentage of net credit sales method at 1.5% for estimating uncollectible accounts. Credit sales for the year were $320,000 and sales returns and allowances were $15,000.
Question vi) An alternative to the allowance method of accounting for bad debts is the direct write-off method. Discuss the limitations