Financial Zccounting

Question 1

Interim company reported the follow account balances:

| 31 December 2009 |

Accounts Receivable (AR) | $230,000 |

Allowance for doubtful accounts | 15,000 |

During the year ended 31 December 2010,

1. Gross sales revenue of $1,200,000, of which 75% was on account, was reported.

2. Sales returns and allowances, all resulting from credit sales, amounted to $10,000.

3. Cash collections on accounts receivable amounted to $830,000, net of sales discounts of $6,000, was received.

4. Uncollectible AR of $5,000 was written off on 31 October 2010.

On 31 December 2010, the accountant reviewed the list of accounts receivable and concluded that five customers, whose total outstanding amount owing to the company was $30,000, would likely to default on payment.

Required:

a. Prepare the journal entries to record the write off of Accounts Receivable on 31 October 2010.

b. Prepare the Allowance for doubtful accounts T-account for the financial year 2010, and the journal entries to record the bad debts expense on Accounts Receivable on 31 December 2010. (Bad debts expense = 20,000)

c. Prepare the Accounts Receivable T-account for the financial year 2010. What is the Accounts Receivable balance on 31 December 2010? (Ending bal. of AR = 279,000)

d. Show how Interim should report its Accounts Receivables in its Balance Sheet as at 31 December 2010.

Question 2

Solec Pte. Ltd. (“SPL”) is a distributor of cars and its financial year ends on 30 June. On 1 July 2009, SPL has the following balances:

Accounts Receivable | $120,000 |

Allowance for doubtful accounts | 35,000 |

The following transactions took place during the year ended 30 June 2010:

1. Total sales revenue of $1,500,000 was earned. 80% was on credit.

2. Sales returns amounted to $8,000. Assume all sales returns were from credit sales.

3. Collections from debtors were $1,188,000.

4 .Two customers declared bankruptcy in May 2010. They owed...