Safe Pharmaceutical Company is engaged in manufacturing of life saving medicines. In order to avoid multiple panels of wholesale dealers for distribution of its medicines, the company has registered few wholesale dealers for sale of its products. The C

To address the requirements, we need to systematically perform the necessary calculations and accounting entries related to accounts receivables and the allowance for doubtful accounts. ### 1) Calculate the Estimated Bad Debts First, we need to determine the total accounts receivable for each aging category: #### Total Aging Analysis 1. **Not yet due** - A Agency: Rs. 50,000 - B Agency: Rs. 70,000 - C Agency: Rs. 30,000 - D Agency: Rs. 50,000 - E Agency: Rs. 0 - **Total = Rs. 200,000** 2. **30 days past due** - A Agency: Rs. 0 - B Agency: Rs. 80,000 - C Agency: Rs. 120,000 - D Agency: Rs. 70,000 - E Agency: Rs. 100,000 - **Total = Rs. 370,000** 3. **60 days past due** - A Agency: Rs. 100,000 - B Agency: Rs. 250,000 - C Agency: Rs. 520,000 - D Agency: Rs. 100,000 - E Agency: Rs. 50,000 - **Total = Rs. 1,020,000** 4. **90 days past due** - A Agency: Rs. 0 - B Agency: Rs. 0 - C Agency: Rs. 60,000 - D Agency: Rs. 80,000 - E Agency: Rs. 100,000 - **Total = Rs. 240,000** 5. **180 days past due** - A Agency: Rs. 0 - B Agency: Rs. 70,000 - C Agency: Rs. 50,000 - D Agency: Rs. 30,000 - E Agency: Rs. 20,000 - **Total = Rs. 170,000** 6. **Over one year past due** - A Agency: Rs. 0 - B Agency: Rs. 70,000 - C Agency: Rs. 50,000 - D Agency: Rs. 0 - E Agency: Rs. 20,000 - **Total = Rs. 140,000** #### Likelihood for Non-Recovery Calculation: - For **Not yet due (Rs. 200,000)**: - Allowance = 1% of Rs. 200,000 = Rs. 2,000 - For **30 days past due (Rs. 370,000)**: - Allowance = 2% of Rs. 370,000 = Rs. 7,400 - For **60 days past due (Rs. 1,020,000)**: - Allowance = 3% of Rs. 1,020,000 = Rs. 30,600 - For **90 days past due (Rs. 240,000)**: - Allowance = 5% of Rs. 240,000 = Rs. 12,000 - For **180 days past due (Rs. 170,000)**: - Allowance = 10% of Rs. 170,000 = Rs. 17,000 - For **Over one year past due (Rs. 140,000)**: - Allowance = 10% of Rs. 140,000 = Rs. 14,000 #### Total Estimated Bad Debts: - Rs. 2,000 + Rs. 7,400 + Rs. 30,600 + Rs. 12,000 + Rs. 17,000 + Rs. 14,000 = Rs. 83,000 ### Adjustment Calculation #### Current Allowance for Doubtful Accounts: - Existing Allowance: Rs. 22,500 - Required Allowance: Rs. 83,000 - Additional Allowance Required: Rs. 83,000 - Rs. 22,500 = **Rs. 60,500** ### 2) Journal Entry for Allowance for Doubtful Accounts Adjustment ```plaintext Date Account Title Debit Credit 30-Jun-2020 Allowance for Doubtful Accounts 60,500 Allowance for Doubtful Accounts 60,500 (To adjust the allowance for doubtful accounts) ``` ### 3) Net Amount of Accounts Receivables in the Balance Sheet #### Total Accounts Receivables: - Total Receivables calculated (totaled from all aging categories) = Rs. 200,000 + Rs. 370,000 + Rs. 1,020,000 + Rs. 240,000 + Rs. 170,000 + Rs. 140,000 = Rs. 2,140,000 #### Total Allowance for Doubtful Accounts: - The new total allowance for doubtful accounts = **Rs. 83,000** #### Net Accounts Receivable: - Net Accounts Receivable = Total Receivables - Total Allowance for Doubtful Accounts = Rs. 2,140,000 - Rs. 83,000 = **Rs. 2,057,000** ### 4) Write-Off Accounting Entry During July 2020, Rs. 20,000 from E Agency considered as bad debt. ```plaintext Date Account Title Debit Credit XX-Jul-2020 Allowance for Doubtful Accounts 20,000 Accounts Receivable - E Agency 20,000 (To write off bad debts for E Agency) ``` ### Summary 1. **Estimated Bad Debts Amount**: Rs. 83,000. 2. **Adjustment Entry**: Allowance for doubtful accounts adjusted by Rs. 60,500. 3. **Net Accounts Receivable in Balance Sheet**: Rs. 2,057,000. 4. **Write-off Entry for Bad Debts**: Rs. 20,000.