Answer:
- (a) On December 10, a customer balance of $1,400 from a prior year was determined to be uncollectible
Dr Sales Returns and Allowances $ 1,400
Cr Accounts Receivable $ 1,400
- (b) On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.
Dr Bad Debt Expense $ 752
Cr Allowance for Uncollectible Accounts $ 752
Explanation:
Initial Balance
Dr Accounts Receivable $ 12,000
Cr Allowance for Uncollectible Accounts $ 500
Kelly’s Camera Shop had sales revenue, of which $60,000 was on credit
Dr Accounts Receivable $ 60,000
Cr Sales $ 60,000
Collections of accounts receivable during 2018 amounted to $58,000.
Dr Cash $ 58,000
Cr Accounts Receivable $ 58,000
(a) On December 10, a customer balance of $1,400 from a prior year was
determined to be uncollectible, so it was written off.
Dr Allowance for Uncollectible Accounts $ 1,400
Cr Accounts Receivable $ 1,400
(b) On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.
Dr Bad Debt Expense $ 752
Cr Allowance for Uncollectible Accounts $ 752
If the company applies the allowance method, it means that the account Allowance for Uncollectible Accounts must show as balance the % of accounts receivables as CREDIT.
Because the company has a debit balance in that account it's necessary to register an entry that compensate the DEBIT value and reflect A CREDIT estimated as % of account receivable.
