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    TUTORIAL CHAPTER 5 - Bad and Doubtful Debts

    Uploaded by

    Showenah Thiru
    This document contains 5 tutorial questions about accounting for receivables. Each question provides details of a company's receivables balance and allowance for doubtful debts and asks the student to calculate the updated allowance and record the necessary journal entries. The questions cover writing off irrecoverable debts, adjusting the allowance for doubtful debts up or down based on a percentage of total receivables, and extracting the relevant figures to financial statements.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    TUTORIAL CHAPTER 5 - Bad and Doubtful Debts

    Uploaded by

    Showenah Thiru
    27 views3 pages
    This document contains 5 tutorial questions about accounting for receivables. Each question provides details of a company's receivables balance and allowance for doubtful debts and asks the student to calculate the updated allowance and record the necessary journal entries. The questions cover writing off irrecoverable debts, adjusting the allowance for doubtful debts up or down based on a percentage of total receivables, and extracting the relevant figures to financial statements.

    Original Title

    TUTORIAL CHAPTER 5- Bad and doubtful debts

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    This document contains 5 tutorial questions about accounting for receivables. Each question provides details of a company's receivables balance and allowance for doubtful debts and asks the student to calculate the updated allowance and record the necessary journal entries. The questions cover writing off irrecoverable debts, adjusting the allowance for doubtful debts up or down based on a percentage of total receivables, and extracting the relevant figures to financial statements.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    27 views3 pages

    TUTORIAL CHAPTER 5 - Bad and Doubtful Debts

    Uploaded by

    Showenah Thiru
    This document contains 5 tutorial questions about accounting for receivables. Each question provides details of a company's receivables balance and allowance for doubtful debts and asks the student to calculate the updated allowance and record the necessary journal entries. The questions cover writing off irrecoverable debts, adjusting the allowance for doubtful debts up or down based on a percentage of total receivables, and extracting the relevant figures to financial statements.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    TUTORIAL QUESTIONS

    Question 1
    A Co has a total receivable of $100,000 at 31 December 2020. A customer has gone into liquidation
    lately, confirming the outstanding balance of $15,000 as irrecoverable. A Co decided to write it off.

    Required:
    Show the double entry in the relevant ledger accounts for the irrecoverable debt.
    1) Record bad debt written off
    Dr Bad debt 15000
    Cr Trade receivables 15000
    2) Close bad debt & transfer to IS
    Dr Income statement 15000
    Cr Bad debt 15000

    Question 2
    A Co has a total receivable of $120,000 at 31 December 2020, and a 2% of it will be adjusted for an
    allowance for receivables. Last year’s allowance for receivables was $2,000.

    Required:
    Show the double entry in the relevant ledger accounts for the allowance for receivables.
    Allowance for doubtful debt = % X Total receivables
    = 2% x $120000
    = $2400

    Record increase in doubtful debt


    Dr Doubtful debt 400
    Cr Allowance for doubtful debt 400

    Transfer the doubtful debt account to IS


    Dr Income statement 400
    Cr Doubtful debt 400

    Question 3
    B Co has a total receivable of $150,000 at 31 December 2020, and a 3% of it will be adjusted for an
    allowance for receivables. Last year’s allowance for receivables was $5,000.

    Required:
    Show the double entry in the relevant ledger accounts for the allowance for receivables.
    Allowance for doubtful debt = % X Total receivables
    = 3% X $150000
    = $4500
    Record decrease
    Dr Allowance for doubtful debt 500
    Cr Doubtful debt 500

    Transfer the doubtful debt to IS


    Dr Doubtful debt 500
    Cr Income statement 500
    Question 4
    At 31 December 2019, DJ Ltd’s total receivables were $775,000 and the allowance for doubtful debts
    was $55,000.
    It was decided that a debt of $12,000 were to be written off, and the allowance for receivables
    adjusted to 5% of the receivables.

    Required:
    (a) Calculate the allowance for receivables as at 31 December 2019.
    Allowance for receivables: ($775000 - $55000 - $12000) X 5% = $35400

    (b) Show the double entry in the relevant ledger accounts for both the irrecoverable debt and
    allowance for receivables
    Record allowance for doubtful debt
    Dr allowance for doubtful debt $55000
    Cr account receivables $55000

    Record allowance for doubtful debt


    Dr allowance for doubtful debt $35400
    Cr account receivables $35400

    Record bad debt written off


    Dr Bad debt $12000
    Cr Trade receivables $12000

    Close bad debt & transfer to IS


    Dr Income statement $12000
    Cr Bad debt $12000

    (c) Show the extracts of financial statements on how these transactions should be reported.
    Question 5
    At 31 December 2019, HJ Co’s total receivables were $875,000 and the allowance for doubtful debts
    was $55,000.
    It was decided that a debt of $18,000 were to be written off. Besides, one of its receivables may not be
    able to settle an outstanding amount of $20,000. An allowance for receivables will be adjusted to 5%
    of the remaining receivables balance.

    Required:
    (a) Calculate the allowance for receivables as at 31 December 2019.

    (b) Show the double entry in the relevant ledger accounts for both the irrecoverable debt and
    allowance for receivables.

    (c) Show the extracts of financial statements on how these transactions should be reported.

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