Answer:
The required journals relating to uncollectible accounts and bad debt expense are:
Uncollectible accounts:
Debit Allowance for doubtful accounts $300
Credit Accounts receivable $300
<em>(To record the write-off)</em>
Bad debt expense:
Debit Bad debt expense (1.5% x $140,000) $2,100
Credit Allowance for doubtful accounts $2,100
<em>(To record bad debt expense)</em>
Explanation:
Burns Company adopts the percentage of credit sales method in estimating accounts receivable that is uncollectible.
The write-off was passed against the allowance for doubtful accounts while 1.5% of the credit sales was used to establish the amount of required bad debt expense.
Based on the journals above therefore, the net realizable value of accounts receivable at the end of the period becomes:
Accounts receivable ($140,000 - $105,000) $35,000
Allowance for doubtful accounts ($2,100 - $300) ($1,800)
Accounts receivable, net realizable value $33,200
