Accounting Adjustments, Bad Debts and Financial Statement Analysis

This assignment solution covers several end-of-chapter problems related to financial accounting. It includes adjusting entries for doubtful debts using both the net credit sales method and the aging of accounts receivable method for Great Outdoors Ltd. Additionally, it addresses journal entries for the issuance of unsecured notes and interest payments for Fairy Wren Ltd. The assignment also provides solutions for transactions involving the retirement, sale, and discarding of assets, including depreciation calculations, for Tongun Company. Furthermore, it covers the purchase of assets with different appraised values and the calculation of depreciation for Powerhouse Ltd, as well as adjustments to accounts receivable control accounts and subsidiary ledgers for Cathy's Corner. Finally, it includes adjusting entries for Chelsea Elliott's trial balance, covering items such as accrued interest, office supplies, and depreciation.

nd of Chapter Problem 12.4
Great Outdoors Ltd sells outdoor furniture settings on credit. The accounting records at 30
June 2015 reveal the following. Ignore GST.
Credit sales (for year) $1,049,000
Credit sales returns and allowances (for year) 88,000
Accounts receivable (balance 30 June 2015) 320,000
Allowance for doubtful debts (credit balance 30 June 2015) 1,500
In the past, the company's yearly bad debts expense had been estimated at 2% of net credit
sales revenue. It was decided to compare the current method with an ageing of the accounts
receivable method. The following analysis was obtained with respect to the accounts
receivable:
Balance
% estimated
uncollectabl
e
Accounts not yet
due $172,100 1/2
Accounts overdue: 10–30 days 59,800 2
31–60 days 43,100 10
61–120 days 24,900 25
121 days and over 20,100 40
$320,000
A.
Prepare the journal entries to adjust the allowance for doubtful debts at 30 June 2015 under:
1. the net credit sales method
2. the ageing of accounts receivable
method.
(Enter debit entries first, followed by credit entries. Credit account titles are
automatically indented when the amount is entered. Do not indent manually. Round
answers to 0 decimal places, e.g. 5,275.)
Great Outdoors Ltd
General journal (extract)
Net credit sales method
Date Particulars Debit Credit
2015
June
30
(Allowance made on 2% of net credit
sales)
Great Outdoors Ltd
General journal (extract)
Ageing of accounts receivable method
Bad debts expense 19220
Allow ance for doubtful debts 19220

Date Particulars Debit Credit
2015
June
30 Bad debts expense 19168
Allow ance for doubtful debts 19168