[F]Aussie World Ltd sells outdoor furniture settings on credit. The accounting records at 30 June 2006 reveal the following . Ignore GST.

Credit sales (for year) $1070000
Credit sales returns and allowances (for year) =90000
accounts receivable (balance 30 June 2006) =323500
allowance for doubtful debts (credit balance 30 June 2006) =1500

the following analysis was obtained with respect to the accounts receivable:
% uncollectible
Balance
Accounts not yet due 173600 1/2 86800
accounts overdue: 10-30 days 60000 2 1200
31-60 days 42000 10 4200
61-120 days 26400 25 6600
121 days and over 21500 40 8600


prepare the journal entries to adjust doubtful debts at 30 June 2006?

my answers is on the left hand side and the total for it is 107400.
then I minused 1500 from it and got 105900.
clearly that is wrong and I don't understand where I'm going wrong.
The actual required allowance is $21468 -1500 but I don't understand where they got the $21468 from?
any help would be appreciated thanks:)

1/2 percent is .5% -- move the decimal and you have .005. You did .5 -- that is, 50%.

Always think about the logic of your answers. You won't necessarily know if you are correct, but is it logical that on new receivables that are not yet due, that 86K out of 176K would be uncollectible? That's a LOT. On older stuff, that's logical, but for older stuff, most of it's already been collected, and the reason it's that old is cause they're having trouble collecting it. But on stuff not yet due, very little of it should be considered uncollectible. One-third of total receivables (107K out of 323K) not being collectible is also not logical.

Unless of course, you are a pushy credit card company or a bank with a lot of sub-prime loans. :-)

Quote:

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Originally Posted by vazzy

[F]Aussie World Ltd sells outdoor furniture settings on credit. The accounting records at 30 June 2006 reveal the following . Ignore GST.

Credit sales (for year) $1070000
Credit sales returns and allowances (for year) =90000
accounts receivable (balance 30 June 2006) =323500
allowance for doubtful debts (credit balance 30 june 2006) =1500

the following analysis was obtained with respect to the accounts receivable:
% uncollectible
Balance
Accounts not yet due 173600 1/2 86800
accounts overdue: 10-30 days 60000 2 1200
31-60 days 42000 10 4200
61-120 days 26400 25 6600
121 days and over 21500 40 8600


prepare the journal entries to adjust doubtful debts at 30 june 2006?

my answers is on the left hand side and the total for it is 107400.
then i minused 1500 from it and got 105900.
clearly that is wrong and i dont understand where im going wrong.
The actual required allowance is $21468 -1500 but i dont understand where they got the $21468 from??
any help would be appreciated thanks:)

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Hey thanks for that!
I can't believe I made that mistake
Lolz
Thanks though :-)

We all do it occasionally. It's in the rules somewhere.

Yeah trutru it was like messing with my head:o :)
I'm pretty sure a question like that will be in my final exam so I feel good now lolz
Thanks again