Reference no: EM133094068

Question 1 - A motor vehicle that cost $12,000 was bought on credit from Trucks Ltd on 1 January 20X9. Financial statements are prepared annually to 31 December and depreciation of vehicles is provided at 25% per annum under the reducing balance method.

Required - Prepare the motor vehicle account and the accumulated provision for depreciation on motor vehicles account for the first two years of the motor vehicle's working life.

Question 2 - Uncollectible Accounts - C&N Ltd, is a manufacturer that makes all sales on a 30-days credit terms. Annual sales are approximately $25 million. At the end of 2016 accounts receivable were presented in the company's Balance Sheet as below:

Accounts Receivable $2,350,000

Less: Allowance for Doubtful account $70,000

During 2017, $740,000 in accounts receivable were written off as uncollectible. Of these amounts written off, receivables totalling $24,000 were unexpectedly collected. At the end of 2017, an aging of accounts receivable indicated a need for an $80,000 allowance to cover possible failure to collect the accounts currently outstanding.

C&N Ltd makes adjusting entries in its accounting records only at year-end.

Required -

a. Explain the difference between making an allowance for bad debts, and writing off a bad debt. Explain how each case is treated and shown in accounting.

b. Prepare one journal entry to summarize all accounts written off against the allowance for doubtful accounts in 2017.

c. Prepare entries to record the $24,000 in accounts receivable which were unexpectedly collected.

d. Prepare an adjusting entry on 31 December 2017 to increase the allowance for doubtful accounts to $80,000.