Peakhurst Limited had the following trial balance at 1 January 2016: Debit $Credit $Cash200 000Accounts receivable600 000Inventory700 000Prepaid insurance60 000Prepaid rent50 000Equipment1 000 000Allowance for doubtful debt20 000Accumulated depreciation200 000Accounts payable500 000Revenue received in advance100 000Income tax payable500 000Loan570 000Share capital400 000Retained profits320 0002 610 0002 610 000 You are given the following additional information for the year ended 31 December 2016:a) Bad debts of $8000 were written off. b) It was decided that allowance for doubtful debts should be 4 per cent of accounts receivable.Required:1) Prepare journal entries for these transactions.2) Show the T-ledger accounts for the following for the year ended 31 December 2016:a) accounts receivableb) allowance for doubtful debtsc)bad debts expense

Journal entry is a record of financial transaction in the books of accounts maintained by an…

Answered: Peakhurst Limited had the following…

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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Peakhurst Limited had the following trial balance at 1 January 2016: Debit $	Credit $
Cash	200 000
Accounts receivable	600 000
Inventory	700 000
Prepaid insurance	60 000
Prepaid rent	50 000
Equipment	1 000 000
Allowance for doubtful debt	20 000
Accumulated depreciation	200 000
Accounts payable	500 000
Revenue received in advance	100 000
Income tax payable	500 000
Loan	570 000
Share capital	400 000
Retained profits	320 000
2 610 000	2 610 000

You are given the following additional information for the year ended 31 December 2016:

a) Bad debts of $8000 were written off.

b) It was decided that allowance for doubtful debts should be 4 per cent of accounts receivable.

Required:

1) Prepare journal entries for these transactions.

2) Show the T-ledger accounts for the following for the year ended 31 December 2016:

a) accounts receivable
b) allowance for doubtful debts
c)bad debts expense

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