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The following data is extracted from the financial records of AU Tiles. The data is in relation to the financial year ending 30 June 2020 and 30 June 2021.    30 June 2020 30 June 2021   $ $ Cash at bank 17,050        20,150 Inventories 1,013,700      1,171,800 Accounts receivable 740,000        755,000 Bills receivable 13,175         15,190 Bad debts written off during the year 9,610              -   Sales revenue for the year 2,821,000      4,030,000 Discount allowed 4,960          4,340   The business uses the Income Statement method to estimate its’ doubtful debts each year. It has been estimated that 1% of the sales revenue of the year will be the bad debts expense for the year. At the beginning of the financial year of 2020 (1 July 2019), the Allowance for Doubtful Debts account has a credit balance of $19,000.   Required: Determine the amounts of the following accounts. Show your workings for each item.  Bad debts expenses for the year ending 30 June 2020 Allowance for doubtful debts at the end of year 30 June 2020 Bad expenses for the year ending 30 June 2021

The following data is extracted from the financial records of AU Tiles. The data is in relation to the financial year ending 30 June 2020 and 30 June 2021.    30 June 2020 30 June 2021   $ $ Cash at bank 17,050        20,150 Inventories 1,013,700      1,171,800 Accounts receivable 740,000        755,000 Bills receivable 13,175         15,190 Bad debts written off during the year 9,610              -   Sales revenue for the year 2,821,000      4,030,000 Discount allowed 4,960          4,340   The business uses the Income Statement method to estimate its’ doubtful debts each year. It has been estimated that 1% of the sales revenue of the year will be the bad debts expense for the year. At the beginning of the financial year of 2020 (1 July 2019), the Allowance for Doubtful Debts account has a credit balance of $19,000.   Required: Determine the amounts of the following accounts. Show your workings for each item.  Bad debts expenses for the year ending 30 June 2020 Allowance for doubtful debts at the end of year 30 June 2020 Bad expenses for the year ending 30 June 2021

Principles of Accounting Volume 1
Principles of Accounting Volume 1
19th Edition
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax
Chapter9: Accounting For Receivables
Section: Chapter Questions
Problem 13EB: Fortune Accounting reports $1,455,000 in credit sales for 2018 and $1,678,430 in 2019. It has an...
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The following data is extracted from the financial records of AU Tiles. The data is in relation to the financial year ending 30 June 2020 and 30 June 2021.

 

 30 June 2020

30 June 2021

 

$

$

Cash at bank

17,050

       20,150

Inventories

1,013,700

     1,171,800

Accounts receivable

740,000

       755,000

Bills receivable

13,175

        15,190

Bad debts written off during the year

9,610

             -  

Sales revenue for the year

2,821,000

     4,030,000

Discount allowed

4,960

         4,340

 

The business uses the Income Statement method to estimate its’ doubtful debts each year. It has been estimated that 1% of the sales revenue of the year will be the bad debts expense for the year. At the beginning of the financial year of 2020 (1 July 2019), the Allowance for Doubtful Debts account has a credit balance of $19,000.

 

Required:

  1. Determine the amounts of the following accounts. Show your workings for each item. 
  2. Bad debts expenses for the year ending 30 June 2020
  3. Allowance for doubtful debts at the end of year 30 June 2020
  4. Bad expenses for the year ending 30 June 2021
  5. Allowance for doubtful debts at the end of year 30 June 2021
  6. Calculate the receivable turnover ratio for year 2021 and comment on the ratio. 
  7. Discuss the differences between ageing method and percentage of net credit sales method. 
  8. Using the information provided in the question and your calculation from requirement A, prepare the Current Assets section of the balance sheet as at 30 June 2021. 
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