Accounting Principles Lecture Example Solutions

Exercise 18.9

Doubtful Debts – Ageing Method Over 2 Years

GAMES GALORE LTD
Required:
A.
Prepare and balance the Allowance for Doubtful Debts account and the Bad Debts Expense account for years ending 30 June 2013 and 30 June 2014.
B.
Prepare the necessary general journal entries to bring the allowance for doubtful debts to the appropriate amount at 30 June 2013 and 30 June 2014.

A.
Allowance for Doubtful Debts
2013
30/6

2012
Accounts Receivable

$33 120 1/7

Balance

$16 200

2013
Balance

25 000 30/6

Bad Debts Expense

$58 120

41 920
$58 120

2013
2014

Accounts Receivable

23 380 1/7

June 30

Balance

25 000

Bad debts expense

20 070

2014
Balance

21 690 30/6
$45 070

$45 070
2014
1/7

Balance

$21 690

Profit and loss

$41 920

Profit and loss

$20 070

Bad Debts Expense
2013
30/6

2013
Allow. for DD

2014
30/6

$41 920 30/6
2014

Allow. for DD

$20 070 30/6

B.
2013
30 June

Bad Debts Expense

41 920

Allowance for Doubtful Debts

41 920

(Adjustment to increase Allow for Doubtful Debts to amount calculated)
2014
30 June

Bad Debts Expense
Allowance for Doubtful Debts

20 070
20 070

(Adjustment to increase Allow for Doubtful Debts to amount calculated)

Suggested Solutions taken from the Solutions Manual to accompany Hoggett J., Medlin J.
Edwards L., Tilling M. and Hogg E. “Financial Accounting” 8th Edition, 2012, John Wiley & Sons
Australia, Ltd.