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Golf Pros Ltd sells golfing equipment on credit. The accounting records for the business at...

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Accounting

Golf Pros Ltd sells golfing equipment on credit. The accounting records for the business at 30 June 2022 reveal the following:

Credit sales (for the year)

$695,500

Credit sales returns and allowances (for the year)

58,500

Accounts Receivable (at 30 June 2022)

212,225

Allowance for Doubtful Debts (credit balance at 30 June 2021)

1,950

Additional information:

In the past, the companys yearly bad debts expense had been estimated at 4% of net credit sales revenue. Management performed a historical analysis and identified the following percentages to calculate potential bad debts:

Balance

% estimated uncollectable

Accounts not yet due

$114,140

0.5

Accounts overdue

10-30 days

39,650

3

31-60 days

28,600

12

61-120 days

16,510

30

121 days and over

13,325

45

$212,225

Required:

(a) Prepare the journal entries including narrations to adjust the Allowance for Doubtful Debts at 30 June 2022 under:

i. the net credit sales method.

ii. the ageing of accounts receivable method.

b) Discuss the main difference between the direct write-off method and the allowance method of recording bad debts.

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