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An extract of account balances from the ledger of Awesome Ltd. for the year ended June 30, 2021 is given below: Accounts Dr (5) Cr ($) Accounts receivable 710,000 Allowance for doubtful debts (unadjusted balance) 100,000 The ageing analysis of accounts receivable on June 30, 2021 (with the comparatives) is as follows: Balance as Balance as at at Percentage Period 30/6/2021 30/6/2020 considered Outstanding Amount Amount doubtful 181 days 48,000 110,000 40% 210.000 1040.000 Average Collection Period 55 days 90 days There is no significant change in sales volume nor cyclical pattern from year to year. Awesome Ltd received a cheque of $20,000 from a customer, Efficient Enterprise, on June 25, 2021. Efficient Enterprise was not listed in the ageing analysis of accounts receivable as the debt owed was written off in 2018. The accountant has not recorded this cheque as at June 30, 2021. After examining the balances of accounts receivable, Awesome Ltd decided to write off a further debt from Existence & Co of $12,000, which were dated January 15, 2018. The owner, Mr. Existence, cannot be traced for payment. Required: (a) Construct the 'Allowance for Doubtful Debts' account for Awesome Ltd as at June 30, 2021 (9 marks) (b) Prepare journal entries to record the bad debt recovered and receipt of cheque of $20,000 from Efficient Enterprise. Include narrations. (4 marks) Page 1 of 1 11 Question 4 (con't) c) Interpret the average collection period of Awesome Ltd from year to year. (3 marks) (d) The debtor ageing listing appears healthier in 2021. What are the two possible reasons causing such improvement? (4 marks) (Total = 9+ 4 + 3 + 4 = 20 marks)

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