As Ena and Al have expanded their business, they have noticed how hard it can be to keep track of which customers owe them money and when they should be paying. As a result of their haphazard approach to managing their receivables they have noticed that Shortcuts to Food has experienced an increase in the number of bad debts they have recorded. In the past Ena would simply write off any bad debts as an expense once she got official notification the customer could not pay. Al has suggested this is a very muddled way of doing things and would prefer to be a bit proactive. Surprisingly, Al has already set up an Allowance for Doubtful Debts account with a balance of $500 Cr in it and has done some research and based on the past couple of years has worked out that about 5% of the credit sales they make end up becoming bad debts. Based on the current year's income statement net sales totalled $38,160 and Al has determined $5,820 of those were cash sales. Al has also

As Ena and Al have expanded their business, they have noticed how hard it can be to keep track of which customers owe them money and when they should be paying. As a result of their haphazard approach to managing their receivables they have noticed that Shortcuts to Food has experienced an increase in the number of bad debts they have recorded. In the past Ena would simply write off any bad debts as an expense once she got official notification the customer could not pay. Al has suggested this is a very muddled way of doing things and would prefer to be a bit proactive. Surprisingly, Al has already set up an Allowance for Doubtful Debts account with a balance of $500 Cr in it and has done some research and based on the past couple of years has worked out that about 5% of the credit sales they make end up becoming bad debts. Based on the current year's income statement net sales totalled $38,160 and Al has determined $5,820 of those were cash sales. Al has also

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Your company just hired a new employee who is unsure about proper accounting procedures. There was a "sales transaction" on Sept. 4 with the terms 3/15, n/60, followed by a "refund" on Sept. 17, and the customer paid on Sept. 21. What accounts would be debited on Sept 21?
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Your company just hired a new employee who is unsure about proper accounting procedures. There was a "sales transaction" on Sept. 4 with the terms 3/15, n/60, followed by a "refund" on Sept. 17, and the customer paid on Sept. 21. Is the customer entitled to a discount?
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Annie is a sole trader who does not keep full accounting records. The following details relate to her transactions with credit customers and suppliers for the year ended 30 June 20X6: Trade receivables, 1 July 20X5 Trade payables, 1 July 20X5 Cash received from customers Cash paid to suppliers Discounts received Contra between payables and recervables lodgers Trade receivables, 30 June 20X6 Trade payables, 30 June 20X6 130,000 60,000 686,400 302,800 2,960 2,000 181,000 84,000 What figure should appear for purchases in Anniets statement of profit or loss for the year ended 30 June 20X6?
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On May 15, Baxtor, Inc. sold $26,000 of merchandise to James, on account. Baxtor could not collect cash from James and wrote off the account. What is the journal entry to record the write-off, assuming Baxtor uses the allowance method? Bad Debt Expense $26,000 Miscellaneous Bank Fees $26,000 Allowance for Bad Debts $26,000 Accounts Receivable - James Allowance for Bad Debts $26,000 Utility Expense $26,000 $26.000 Bad Debt Revenue $26,000 Allowance for Bad Faith Unpaid Accounts $26,000
As part of the review of her business Rita has been looking into what she is owed by various customers and how many debts are outstanding. Rita has been able to gather the following information about her customers and credit sales. Rita has reached out to an old University friend to get some advice about the likelihood of the amounts owed to her being uncollectible. Age of Customer Debt Amounts owed Estimate of % that (including GST) will not be collected. 1-30 days overdue 14,107.50 5% 31– 180 days overdue 6,204.00 16 % 181 – 365 days overdue 2,458.50 25 % 1 year + overdue 517.00 100 % 23,287.00 Perfect Cover Insurance Brokers sales data for the past year is $42,900 $11,600 $ 2,400 (returns are only available on credit sales) Čredit Sales and Commissions Cash Sales and Commissions Sales Returns Industry data shows that 5% of credit transactions are likely to go bad. Rita has also informed you that the current balance in her allowance for doubtful debts account is 500 Dr after a recent…
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