Chapter 9, Problem 2APSA

Requirement 1 (a):-

To determine

To calculate: Journalize the entry of bad debts which are 1.5% of the credit sales.

Answer to Problem 2APSA

Solution: Bad debts are $101810.

Explanation of Solution

Bad debts A/c     Dr  101810

    To Provision for bad debts A/c     101810

Working:

Bad debts = [1.5% of credit sales] + Debit balance of Allowance for doubtful accounts
= [2.5% of 5682000] +16580
= 85230 + 16580
= 101810

Conclusion

Journal entry of bad debts is prepared.

Requirement 1 (b):-

To determine

To calculate: Journalize the entry of bad debts which is 1 % of total sales.

Answer to Problem 2APSA

Solution: Bad debts are $92450.

Explanation of Solution

Bad debts A/c     Dr  92450

   To Provision for bad debts A/c   92450

Working:

Bad debts = [1% of total sales] + Debit balance of Allowance for doubtful accounts
= [1% of (1905000 + 5682000)] + 16580
= [1% x 7587000] + 16580
= 75870 + 16580
= 92450

Conclusion

Journal entry of bad debts is prepared.

Requirement 1 (c):-

To determine

To calculate: Journalize the entry of uncollectible account receivables which is 5%.

Answer to Problem 2APSA

Solution: Bad debts are $80085.

Explanation of Solution

Bad debts A/c    Dr  80085

   To Provision for bad debts A/c    80085

Working:

Bad debts = [5% of account receivables] + Debit balance of Allowance for doubtful accounts
= [5% of 1270100] + 16580
= 63505 + 16580
= 80085

Conclusion

Journal entry of uncollectible account receivables is prepared.

Requirement 2:-

To determine

To calculate: To prepare account receivables account and allowance for doubtful accounts as on Dec 31, 2015 of part 1(a).

Answer to Problem 2APSA

Solution: Balance of debtor a/c is $1270100 ** provision for doubtful accounts is $85230.

Explanation of Solution

Debtor A/c
Particular	$	Particular	$
Balance b/f	1270100	Balance c/f	1270100
	1270100		1270100
Provision for bad debts A/c
Particular	$	Particular	$
Balance b/f	16580	Bad debts	101810
Balance c/f	85230
	101810		101810

Conclusion

The account receivables account and allowance for doubtful accounts as on Dec 31, 2015 of part 1(a) is prepared.

Requirement 3:-

To determine

To calculate: To prepare account receivables account and allowance for doubtful accounts as on Dec 31, 2015 of part 1(c).

Answer to Problem 2APSA

Solution: Balance of debtor a/c is $1270100 ** provision for doubtful accounts is $63505.

Explanation of Solution

Debtor A/c
Particular	$	Particular	$
Balance b/f	1270100	Balance c/f	1270100
	1270100		1270100
Provision for bad debts A/c
Particular	$	Particular	$
Balance b/f	16580	Bad debts	80085
Balance c/f	63505
	80085		80085

Conclusion

The account receivables account and allowance for doubtful accounts as on Dec 31, 2015 of part 1(c) is prepared.