Question

The following details were obtained from the accounting records of Cool Climate Consultants at the end of the financial year. Cool Climate Consultants is registered for GST.

Consulting fee owed to Cool Climate Consultants Allowance for doubtful debts Debts to be written off

$517 000 $30 000 $10 010

(includes GST) (Includes GST)

The firm requires an allowance for doubtful debts of 10% of outstanding fees at 30 June.

(a) Prepare the appropriate general journal entries to record adjustment to the allowance for doubtful debts and bad debts expense. Show calculations.  

• Journal entry to show Allowance for doubtful debts

                      Show calculations

• Journal entry to show Bad debts expense

                      Show calculations

(b) Prepare and balance the Allowance for Doubtful Debts T account at 30 June 2019.

Answer 1

Solution a:

Particulars	Debit	Credit
Allowance for Doubtful accounts Dr	$10,010
To Accounts Receivable		$10,010
(to show Allowance for doubtful debts)

Account receivable balance = 517000 - 10010 = $506,990

Bad debt expense = (506990*10%) - 30000 + 10010 = $30,709

Particulars	Debit	Credit
Bad Debt Expense Dr	$30,709
To Allowance for dountful accounts		$30,709

Solution b:

Allowance for doubtful account
		Beg bal.	30000
Write off	10010	Bad debt expense	30709
		End bal.	50699