1. Explain the direct write-off method and the allowance method of recognizing bad debt expense.
2. From the given information prepare the Statement of Cash Flows of Abdullah &Company on 31st December 2015
Cash flow from activities:
Net Income SR 160375
Cash provided by operating activities:
Depreciation expenses SR 44 200
Issuance of ordinary shares 50 000
Gain on sale of plant assets 4 375
Decrease in accounts payable (4 750)
Sale of plant assets 45 250
Purchase of land (35 000)
Decrease in inventory 7 750
Amortization of intangibles
8 150 Payment of cash dividend
(9 900) Redemption of bonds
(25 000)
3. The trial balance before adjustment of XYZ Company reports the following balances:
Dr . Cr.
Accounts receivable $100,000
Allowance for doubtful accounts $ 2,500
Sales (all on credit) 750,000
Sales returns and allowances 40,000
Instructions
Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to be (1) 6% of gross accounts receivable and (2) 1% of net sales.
4. AG Inc. made a $10,000 sale on account with the following terms: 1/15, n/30. If the company uses the net method to record sales made on credit.
Prepare the journal entries for following:
1- Record the sale
2- Payment on $6,000 of sales within discount period?
3- Payment on $4,000 of sales received after discount period?