The information in the following table relates to the accounts receivable and allowance for doubtful debts of Prime Moving Ltd. The company’s accounting period ends on 30 June each year. The company policy is to provide an allowance for doubtful debts at the rate of 3% of accounts receivable at 30 June each year. The balance of the Allowance for Doubtful Debts account on 1 July 2019 was $14 000. The following information is given for the year ending 30 June 2020and 30 June 2021, in order to determine the bad debts expense for each year and the balance of allowance for doubtful debts at the end of each year. 2020 2021 Accounts receivable (ending balance at 30 June) $560,000 $630,000 Bad debts written off during the year 8,400 0 Allowance for doubtful debts at 1 July (Beginning of the period) (a) (d) Bad debts expense for the year (b) (e) Allowance for doubtful debts at 30 June (Ending balance) (c) (f) Required: a) Determine the missing amounts in the table.
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.
The information in the following table relates to the
|
|
2020 |
2021 |
|
Accounts receivable (ending balance at 30 June) |
$560,000 |
$630,000 |
|
Bad debts written off during the year |
8,400 |
0 |
|
Allowance for doubtful debts at 1 July (Beginning of the period) |
(a) |
(d) |
|
Bad debts expense for the year |
(b) |
(e) |
|
Allowance for doubtful debts at 30 June (Ending balance) |
(c) |
(f) |
Required:
a) Determine the missing amounts in the table.
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