Assume that the business uses the allowance-method
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a) Assume that the business uses the allowance-method for accounting for bad debts and decides to
estimate its bad debts expense based on 6% of the Accounts Receivable. Use the journal entry screen and
prepare the journal entry required to bring in the required allowance for doubtful debts as at 31 March
2020.
b) Prepare the adjusting journal entry on 31 March 2020 required to bring in the required allowance for
doubtful debts assuming the Allowance for Doubtful Debts has a credit balance of $365.50 at 29 February
2020.
c) Assume the same facts as in part (b), except that there is a debit balance of $180.30 in the Allowance for
Doubtful Debts at 29 February 2020. Prepare the journal entry on 31 March 2020 required to bring in the
required allowance for doubtful debts.
d) Assume that the business writes-off bad debts amounting to $489.50 including GST and estimates an
allowance for doubtful debts of 7% of Accounts Receivable is required at 30 April 2020. Prepare the journal
entry required to bring in the required allowance for doubtful debts for next month at 30 April 2020 after
the bad debts have been written off.
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