Season Master Trading Company is dealing is consumable merchandise. The goods are sold on 60 days credit terms. The debit balance in the allowance for doubtful accounts was amounting to Rs. 8,300 for the accounts receivables written off during the firs

To solve the problem, let's break it down step by step: ### Part 1: Compute the Amount of Expected Bad Debts To compute the expected bad debts based on the ageing of accounts receivables, we calculate the expected uncollectible amounts for each category: 1. **Not yet due:** - Amount: Rs. 85,000 - Expected Uncollectible %: 0.5% - Expected Bad Debt: \( 85,000 \times 0.005 = Rs. 425 \) 2. **60 days past due:** - Amount: Rs. 530,000 - Expected Uncollectible %: 1% - Expected Bad Debt: \( 530,000 \times 0.01 = Rs. 5,300 \) 3. **180 days past due:** - Amount: Rs. 650,000 - Expected Uncollectible %: 2% - Expected Bad Debt: \( 650,000 \times 0.02 = Rs. 13,000 \) 4. **One year past due:** - Amount: Rs. 320,000 - Expected Uncollectible %: 5% - Expected Bad Debt: \( 320,000 \times 0.05 = Rs. 16,000 \) 5. **Two years past due:** - Amount: Rs. 110,000 - Expected Uncollectible %: 20% - Expected Bad Debt: \( 110,000 \times 0.20 = Rs. 22,000 \) Now, we sum all the expected bad debts: \[ Total Expected Bad Debts = Rs. 425 + Rs. 5,300 + Rs. 13,000 + Rs. 16,000 + Rs. 22,000 = Rs. 56,725 \] ### Part 2: Record Adjustment of Allowance for Doubtful Accounts The current balance in the allowance for doubtful accounts before adjustments is Rs. 8,300 (debit balance). To determine the adjustment needed: - Required allowance for doubtful accounts = Rs. 56,725 - Current allowance = Rs. -8,300 (debit balance) We need to adjust the allowance account from a debit balance to a credit balance of Rs. 56,725. The adjustment amount would be: \[ Adjustment Required = 56,725 + 8,300 = Rs. 65,025 \] **Journal Entry:** ``` Bad Debt Expense Rs. 65,025 Allowance for Doubtful Accounts Rs. 65,025 ``` ### Part 3: Present the Accounts Receivable in the Balance Sheet as at 30 June 2020 Assuming the total accounts receivable is the sum of all categories given, we need to present it net of the allowance for doubtful accounts: 1. Total Accounts Receivable: - Not yet due: Rs. 85,000 - 60 days past due: Rs. 530,000 - 180 days past due: Rs. 650,000 - One year past due: Rs. 320,000 - Two years past due: Rs. 110,000 Total = Rs. 85,000 + Rs. 530,000 + Rs. 650,000 + Rs. 320,000 + Rs. 110,000 = Rs. 1,695,000 2. Allowance for Doubtful Accounts (after adjustments): - Rs. 56,725 3. Net Accounts Receivable: \[ Net Accounts Receivable = Total Accounts Receivable - Allowance for Doubtful Accounts \] \[ Net Accounts Receivable = 1,695,000 - 56,725 = Rs. 1,638,275 \] **Balance Sheet Presentation:** ``` Accounts Receivable Rs. 1,695,000 Less: Allowance for Doubtful Accounts (Rs. 56,725) ----------------------------------------- Net Accounts Receivable Rs. 1,638,275 ``` ### Part 4: Accounting Entry for Writing Off Irrecoverable Accounts During July 2020, Rs. 25,000 worth of accounts receivables that were over two years past due were found to be irrecoverable. **Journal Entry for Write-off:** ``` Allowance for Doubtful Accounts Rs. 25,000 Accounts Receivable Rs. 25,000 ``` ### Summary of Entries 1. Adjustment for estimated bad debts: - **Bad Debt Expense**: Rs. 65,025 debit; **Allowance for Doubtful Accounts**: Rs. 65,025 credit. 2. Write-off entry in July: - **Allowance for Doubtful Accounts**: Rs. 25,000 debit; **Accounts Receivable**: Rs. 25,000 credit. This completes the necessary calculations and journal entries regarding the accounts receivables and allowance for doubtful accounts.