Please help me to slove the follow quiz! thanks!?

Question

(a) The Allowance for Doubtful Debt account of Kara Trading Co has a balance of $5,253 as of 1 July 2000. At the end of the period, $7,896 was written off and $181,130 new credit sales were made. The company's policy is to provide for doubtful debts based on the aging of Accounts Receivable. This was calculated to be $10,086. What is the amount of bad and doubtful debt expense for the period? (Format example = 12,988; that is, include a comma but no dollar sign).


(b)Because accountants are unable to tell exactly which sales will prove uncollectable, at the end of a year they:

1. Do not record any credit sales until they have been collected 2. Estimate the uncollectables and match bad debts expense against sales 3. Deduct the actual uncollectables from sales 4. Ignore the potential bad debts 5. None of the above

Please help! thanks!

Answer 1

(a) y/e (year end); p/y (prior year); Income statement (I/S); Accounts receivable (A/R); Balance sheet (B/S) -
The balance of p/y provision stands at $5,235, is topped up $4,851 at y/e to meet corporate's 10% A/R of $10,086. Above which ($10,086), $7,896 became bad.
$7,896+$4,851= amount to reduce I/S by debiting.

(The accumulated total of corporate's provision of $10,086 + actual bad debt $7,896 = bad and doubtful debt expense, inclusive of p/y provision. B/S provision = $10,086 )
(The sum total of corporate's additional provision of $$4,851 + actual bad debt $7,896 = bad and doubtful debt expense, inclusive of provision for the y/e in I/S.)

Under FRS 37, no provision can be made unless the conditions have been met.
(Refer to FRS 37.)

Sales revenue inside I/S may be netted off against bad debt or rather, bad debt put into Cost of sales being a cost to the coy.
$7,896 should hit sales, reducing it accordingly $4,851 should increase provision to said amount.

If there is no other place to put it like Cost of sales, net $7,896 and $4,851 against sales, reducing $181,130 - ($7,896+$4,851). It comes closest to matching option 3. under question (b).

Allowance for bad debt -
Dr I/S Allowance for bad debt $4,851
Cr B/S Allowance for bad debt $4,851;
Bad debt expense incurred -
Dr I/S Bad Debt expense $7,896
Cr B/S A/R $7,896

(b)
1. Do not record any credit sales until they have been collected;
Incorrect: Sales is credited upon delivery of goods & services regardless.

2. Estimate the uncollectables and match bad debts expense against sales;
An unlikely answer provided estimates satisfy the recognition criteria under FRS37 that a provision should be made:

- an enterprise has a present obligation (legal or constructive) as a result of a past event;
- it is probable (ie more likely than not) that an outflow of resources embodying economic benefit will be required to settle the obligation, and;
- a reliable estimate can be made of the amount of the obligation.

3. Deduct the actual uncollectables from sales.
The Best answer because the uncollectables:
- have a reliable estimate based on actual uncollectibles.

4. Ignore the potential bad debts.
Worst answer. Prudence concept.

5. None of the above.
Definitely not this one.

ACCA 1.1?

Answer 2

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Answer 3

About $100, Yeah, definitely about $100. I'm an excellent driver.

Answer 4

too long