Question

Question 4

At the end of their accounting period, on December 2012, Berg Enterprise have reviewed their receivable and found doubtful accounts.

As of December 2013 these doubtful accounts are as follows

Required;

(i) Prepare the doubtful accounts provision at the end of 2012 ) (ii) Prepare the appropriate entries at the end of 2012 (

(iii) Prepare the doubtful accounts provisions at the end of 2013 (iv) Prepare the appropriate entries at the end of 2013

Customer	A/R Balance	Comments	Probable loss
Alban	200	Filed for protection from creditors	25%
Adam	300	Filed for protection from creditors	40%

Customer	A/R Balance	Comments	Probable (real) loss
Alban	200	Filed for protection from creditors	25%
Adam	300	Paid 50 in total settlement of account	250

Answer 1

(i)

Provision for probalbe loss = 200*25% + 300*40% = 170

(ii)

Account	Debit	Credit
Bad debt expense	170
Allownace for doubtful accounts	170
(entry to record bad debt expense for the year)

(iii)

Balance provision required = 200*25% = 50

Bad debt expense for the year = 50 + 250 - 170 = 130

(iv)

Account	Debit	Credit
Bad debt expense	130
Allownace for doubtful accounts	130
(entry to record bad debt expense for the year)
Allownace for doubtful accounts	250
Accounts receivable		250
(entry to write off uncollectible accounts)