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Where a specific trade receivable is written off as bad, the corresponding credit is expected to be in
A. Purchases Account
B. Bad Debts Account
C. Allowance for Doubtful Debts Account
D. Sales Account
E. Receivables Ledger Control Account
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The following information was extracted from the books of LAHA Limited:
| Product P (units) | Product Q (units) |
|---|---|
| November | 1,500 |
| December | 2,000 |
| January | 1,000 |
| February | 2,000 |
| March | 3,000 |
Product P is sold for ₦200 per unit, and Product Q for ₦300 per unit. All sales are on credit. 20% of total sales are received in the month of sale, 40% in the following month, and the remaining balance (excluding bad debts) is received at the end of the second month. Bad debts are 2% of total sales and are written off at the end of the second month following sale.
Required:
Calculate the cash receipts expected in January, February, and March. (12 Marks)
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In preparing financial statements, the bad debts account is closed by a transfer to:
A. Statement of financial position
B. Provision for bad debt account
C. Statement of profit or loss
D. Trading account
E. Statement of cash flows
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Which of the following is the effect of a reduction in allowances for doubtful receivables?
A. A reduction in gross profit
B. A reduction in profit for the period
C. A reduction in cash balance
D. Increase in profit for the period
E. Increase in cash balance
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It was discovered on December 31, 2016, Baruwa Limited had a receivables balance of N15,000,000. It was discovered, before the preparation of the final accounts, that a customer owing N3,000,000 would not be able to settle such debts. It is the policy of Baruwa Limited to make allowances for doubtful receivables of 5% of all outstanding receivables at the end of each accounting period.
During the accounting year of 2017, the company made total credit sales of N19,600,000, out of which an amount of N11,000,000 was collected from customers. A court declared a customer who owes the company an amount of N1,700,000 bankrupt in August 2017. The company recorded some cheques amounting to N3,500,000 that were dishonoured.
The company recorded N30,000,000 and N17,000,000 in connection with cash and credit sales, respectively, in the year 2018. The company received N25,000,000 from trade receivables and also showed N13,400,000 as the outstanding balance on the sales ledger account. A cheque was received from the customer whose debt was written off in 2016 in full settlement of his debt.
Required:
Prepare and balance the following accounts:
a. Trade Receivables Account (8 Marks)
b. Bad Debts Account (3 Marks)
c. Allowances for Doubtful Receivables Account (3 Marks)
d. Prepare an extract of the Statement of Financial Position as at December 31, 2018, showing the relevant balances. (6 Marks)
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Funke Limited’s management, based on the prudence principle, evaluated its trade receivables accounts over a period of three years ending on December 31 each year. The following were the extracts from the records of the outcome of the evaluation:
| Year | Trade Receivables (₦) | Bad Debts (₦) | Allowance for Doubtful Receivables (%) |
|---|---|---|---|
| 2014 | 654,000 | 24,000 | 2% |
| 2015 | 745,000 | 18,000 | 2% |
| 2016 | 585,000 | 22,000 | 2% |
The value stated for trade receivables was net of the bad debts but before the allowance for bad debts. There was no allowance for bad debt before 2014.
Required: Prepare the ledger accounts for Bad Debts and Allowance for Doubtful Receivables.
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The double entry to record cash received in a subsequent year on debt which had been written off as bad in a previous period is
A. Debit trade receivables account, Credit cash account
B. Debit bad and doubtful debts expense account, Credit cash account
C. Debit cash account, Credit bad debt expense account
D. Debit trade receivables account, Credit bad debt expense account
E. Debit cash account, Credit profit or loss account
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What is the amount of allowance recognized in the statement of profit or loss?
The following is an information extract from the books of accounts of Walling Parking Enterprises, a sole trader:
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Mr. Mala, the proprietor of a small bookshop, has requested you to prepare his accounts. He did not keep complete records of account. From his passbook, notebook, bank statements, and oral information obtained during a meeting with him, you put together the following figures for the year ended December 31, 2015:
| Item | January 1, 2015 (N’000) | December 31, 2015 (N’000) |
|---|---|---|
| Cash in hand | 400 | 890 |
| Bank overdraft | 18,000 | 14,000 |
| Furniture & Fittings | 2,000 | 2,000 |
| Delivery van | 3,600 | 3,600 |
| Inventories | 20,400 | 22,400 |
| Trade receivables | 12,400 | 9,800 |
| Trade payables | 9,120 | 8,400 |
| Bills payables | 2,210 | 2,200 |
| Bills receivables | 3,100 | 3,200 |
During the year, Mr. Mala used part of the inventories for domestic affairs which was agreed at N1,200,000. He drew cash for private expenses at frequent intervals. He estimated his drawing in cash at N2,800,000 for the year.
He also agreed with the following suggestions:
Required:
a. Ascertain Mr. Mala’s bookshop’s profit or loss for the year ended December 31, 2015. (8 Marks)
b. Prepare the statement of financial position of the bookshop at December 31, 2015. (12 Marks)
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Find Related Questions by Tags, levels, etc.
Where a specific trade receivable is written off as bad, the corresponding credit is expected to be in
A. Purchases Account
B. Bad Debts Account
C. Allowance for Doubtful Debts Account
D. Sales Account
E. Receivables Ledger Control Account
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The following information was extracted from the books of LAHA Limited:
| Product P (units) | Product Q (units) |
|---|---|
| November | 1,500 |
| December | 2,000 |
| January | 1,000 |
| February | 2,000 |
| March | 3,000 |
Product P is sold for ₦200 per unit, and Product Q for ₦300 per unit. All sales are on credit. 20% of total sales are received in the month of sale, 40% in the following month, and the remaining balance (excluding bad debts) is received at the end of the second month. Bad debts are 2% of total sales and are written off at the end of the second month following sale.
Required:
Calculate the cash receipts expected in January, February, and March. (12 Marks)
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In preparing financial statements, the bad debts account is closed by a transfer to:
A. Statement of financial position
B. Provision for bad debt account
C. Statement of profit or loss
D. Trading account
E. Statement of cash flows
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Which of the following is the effect of a reduction in allowances for doubtful receivables?
A. A reduction in gross profit
B. A reduction in profit for the period
C. A reduction in cash balance
D. Increase in profit for the period
E. Increase in cash balance
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It was discovered on December 31, 2016, Baruwa Limited had a receivables balance of N15,000,000. It was discovered, before the preparation of the final accounts, that a customer owing N3,000,000 would not be able to settle such debts. It is the policy of Baruwa Limited to make allowances for doubtful receivables of 5% of all outstanding receivables at the end of each accounting period.
During the accounting year of 2017, the company made total credit sales of N19,600,000, out of which an amount of N11,000,000 was collected from customers. A court declared a customer who owes the company an amount of N1,700,000 bankrupt in August 2017. The company recorded some cheques amounting to N3,500,000 that were dishonoured.
The company recorded N30,000,000 and N17,000,000 in connection with cash and credit sales, respectively, in the year 2018. The company received N25,000,000 from trade receivables and also showed N13,400,000 as the outstanding balance on the sales ledger account. A cheque was received from the customer whose debt was written off in 2016 in full settlement of his debt.
Required:
Prepare and balance the following accounts:
a. Trade Receivables Account (8 Marks)
b. Bad Debts Account (3 Marks)
c. Allowances for Doubtful Receivables Account (3 Marks)
d. Prepare an extract of the Statement of Financial Position as at December 31, 2018, showing the relevant balances. (6 Marks)
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Funke Limited’s management, based on the prudence principle, evaluated its trade receivables accounts over a period of three years ending on December 31 each year. The following were the extracts from the records of the outcome of the evaluation:
| Year | Trade Receivables (₦) | Bad Debts (₦) | Allowance for Doubtful Receivables (%) |
|---|---|---|---|
| 2014 | 654,000 | 24,000 | 2% |
| 2015 | 745,000 | 18,000 | 2% |
| 2016 | 585,000 | 22,000 | 2% |
The value stated for trade receivables was net of the bad debts but before the allowance for bad debts. There was no allowance for bad debt before 2014.
Required: Prepare the ledger accounts for Bad Debts and Allowance for Doubtful Receivables.
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The double entry to record cash received in a subsequent year on debt which had been written off as bad in a previous period is
A. Debit trade receivables account, Credit cash account
B. Debit bad and doubtful debts expense account, Credit cash account
C. Debit cash account, Credit bad debt expense account
D. Debit trade receivables account, Credit bad debt expense account
E. Debit cash account, Credit profit or loss account
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What is the amount of allowance recognized in the statement of profit or loss?
The following is an information extract from the books of accounts of Walling Parking Enterprises, a sole trader:
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Mr. Mala, the proprietor of a small bookshop, has requested you to prepare his accounts. He did not keep complete records of account. From his passbook, notebook, bank statements, and oral information obtained during a meeting with him, you put together the following figures for the year ended December 31, 2015:
| Item | January 1, 2015 (N’000) | December 31, 2015 (N’000) |
|---|---|---|
| Cash in hand | 400 | 890 |
| Bank overdraft | 18,000 | 14,000 |
| Furniture & Fittings | 2,000 | 2,000 |
| Delivery van | 3,600 | 3,600 |
| Inventories | 20,400 | 22,400 |
| Trade receivables | 12,400 | 9,800 |
| Trade payables | 9,120 | 8,400 |
| Bills payables | 2,210 | 2,200 |
| Bills receivables | 3,100 | 3,200 |
During the year, Mr. Mala used part of the inventories for domestic affairs which was agreed at N1,200,000. He drew cash for private expenses at frequent intervals. He estimated his drawing in cash at N2,800,000 for the year.
He also agreed with the following suggestions:
Required:
a. Ascertain Mr. Mala’s bookshop’s profit or loss for the year ended December 31, 2015. (8 Marks)
b. Prepare the statement of financial position of the bookshop at December 31, 2015. (12 Marks)
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