On 1 January 2020, Nothing Else Bhd (NEB) had Accounts Receivable RM278,000, Notes Receivable RM60,000 and Allowance for Doubtful Accounts RM26,400. NEB prepares financial statements annually at 31 December. During the year, the following selected transactions occurred: 20 January 2020 NEB sold RM48,000 of merchandise to Matters Bhd (MB), terms n/30. 20 February 2020 MB forwarded a notice to NEB asking for longer credit period for the sales amounting RM48,000 in previous month. NEB agreed to extend the credit period and convert the remaining balance of account receivable to 9%, 90-day note receivable. 19 May 2020 NEB managed to collect MB note receivable in full. 25 August 2020 NEB converted a RM8,000 account receivable of Wayward Bhd (WB) to 7%, 90-day note receivable in settlement of a past due balance on account. 25 November 2020 The WB note receivable was dishonored. WB is not bankrupt and future payment is anticipated. REQUIRED: (a) Prepare the appropriate journal entries to record the above transactions for Nothing Else Bhd. Please show your calculations.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
On 1 January 2020, Nothing Else Bhd (NEB) had
20 January 2020 NEB sold RM48,000 of merchandise to Matters Bhd (MB),
terms n/30.
20 February 2020 MB forwarded a notice to NEB asking for longer credit period
for the sales amounting RM48,000 in previous month. NEB
agreed to extend the credit period and convert the remaining
balance of account receivable to 9%, 90-day note receivable.
19 May 2020 NEB managed to collect MB note receivable in full.
25 August 2020 NEB converted a RM8,000 account receivable of Wayward Bhd
(WB) to 7%, 90-day note receivable in settlement of a past due balance on account.
25 November 2020 The WB note receivable was dishonored. WB is not bankrupt
and future payment is anticipated.
REQUIRED:
(a) Prepare the appropriate
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