Australian

School of Business
ACCT1501 Accounting and Financial Management 1A Session 1 2013

TUTORIAL WEEK 7 Solutions to Tutorial Questions

Tutorial Questions: v Problem 8.16; PA5.3; Additional Question 2

Problem 8.16
Antheas Homewares Bank reconciliation statement as at 30 April 2012 $ $ Balance as per bank statement 1,831 Add: Outstanding deposit 246 2,077 Deduct: Unpresented cheques 562 159 579 311 580 293 763 Adjusted balance as per Cash at bank account 1,314 Ending balance per business records (2,594 + 3,053 4,444) Add: Bill receivable Interest on bill Interest revenue 1,203 650 46 696 58 421 198 24 754 1,957 643 1,314

CR

DR DR

Deduct: Cheque dishonoured Bond Enterprises Correction cheque no. 574 Inventory Govt. Debits tax Adjusted balance as per Cash at bank account Journal Cash at bank Bill receivable Interest on bill Interest revenue Sundry debtors Bond Enterprises Inventory Govt debits tax Cash at bank

754 650 46 58 421 198 24 643

Problem A5.3 1 (a) Anna Cash Cash Cash Closing balance

Opening balance Sales Sales

24,810 26,653 53,561 105,024

30,220 23,356 19,016 32,432 105,024

Anna opening balance: $24,810 (b) Opening balance Sales Sales Sales 26,269 14,978 23,286 10,060 74,593 Natalie Cash Closing balance 25,763 48,830 74,593

Natalie opening balance: $26,269 (c) Yuki Opening balance 28,674 28,674 Yuki closing balance (before write-off): $18,425 (d) Opening balance Sales 56,841 71,951 128,792 Fred sales: $71,951 Fred Cash Cash Closing balance 14,788 24,427 89,577 128,792 Cash Closing balance 10,249 18,425 28,674

(e) Accounts receivable control (opening balance) Anna Fred Natalie Yuki 24,810 56,841 26,269 28,674 136,594 (a) (b)

Accounts receivable opening balance: $136,594 (f) Total sales for 2012 Anna Fred Natalie Yuki Total credit sales for 2012: $200,489 (g) Allowance for doubtful debts (closing balance) ADD = 3% of Credit Sales (f) = 3% of 200,489 = 6,015 (rounded) Allowance for doubtful debts - closing balance: $6,015 (h) Bad debts expense for 2012: (c) (g) Yuki CB Allowance for doubtful debts 18,425 OB 6,015 Bad debts 24,440 7,982 16,458 24,440 80,214 71,951 48,324 200,489 (d)

Total bad debts expense 2012: $16,458

Using the general journal format, complete the following journal entries (as at the end of 2012): 2 Write-off the remaining balance of Yukis account Allowance for Doubtful Debts (c) A/C Rec - Yuki Debit 18,425 Credit 18,425

Recognise the bad debts expense for the year Bad Debt Expense (h) Allowance for Doubtful Debts Debit 16,458 Credit 16,458

AQ 2 (This is question 3, from the semester 1, 2004 final exam, worth 10 marks) On 1st January 2003, Britney Company has a debit balance of $21,000 in Accounts Receivable and a credit balance of $1,550 in the Allowance for Doubtful Debts. During 2003 Britney sold goods for cash for $19,600, and on credit $79,500. On August 1, 2003, Britney wrote off an account as uncollectable of $230 and collected $82,000 from outstanding accounts. Britney Companys financial year ends on 31st December. Required: a) (i) Give the 31st December adjusting entry to record uncollectible account expense if uncollectable accounts are estimated to be 2% of credit sales. (3 marks) (ii) Compute the net accounts receivable after the adjusting entry. (2 marks) b) (i) Give the 31st December adjusting entry to record uncollectible accounts, which are estimated to be $2,150 from aging receivables. (3 marks) (ii) Compute the net accounts receivable after the adjusting entry. (2 marks) Solution: a) (i) DR Bad debts expense (E) 1590 [2%*79,500] CR Allowance for doubtful debts (Contra) 1590 [3 marks: 1 mark for each account, 1 mark for number] (ii) Accounts receivable: 21,000 + 79,500 230 82,000 = 18,270 Allowance adjustment: 18,270 (1,550 230 + 1,590) = 15,360 [2 marks: 1 if right approach, 2 if right answer] b) (i) DR Bad debts expense (E) 830 [1550 230 + X = 2150] CR Allowance for doubtful debts (Contra) 830

[3 marks: 1 mark for each account, 1 mark for number] (ii) 18,270 2,150 = $ 16,120 [2 marks]