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Accounts receivable balance on 1 January 2015 is £400.
2. Impairment for doubtful accounts receivable balance on 1 January 2015 is £40.
3. During 2015 sales were £3,000. Eighty percent of the sales were credit sales. Sales
return in respect of credit sales were £100. There were no returns in respect of cash
sales.
4. Cash collected on accounts receivables during 2015 was £1,000.
5. Accounts receivable written-off as bad debt expenses during 2015 were £30. The
written-off accounts receivable had been considered doubtful as of the end of 2014.
Required:
a. Record the write-off of uncollectible bad debt during 2015.
b. Calculate the impairment for doubtful accounts receivable and record the
appropriate accounting entry on 31 December 2015 for each of the following
independent assumptions:
(i)The end of year balance of the impairment for doubtful accounts is based on the
ending balance of accounts receivable. The accountant of the Conett Company
estimates, from past experience, that 10% of the 31 December 2015 accounts
receivable will prove to be doubtful.
(ii)The end of year balance of the impairment for doubtful accounts is based on net
credit sales. The accountant estimates that 5% of the net credit sales will prove to
be doubtful.
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