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BeleVu supplies showed the following selected adjusted balances at its December 31, 2010 year end:
Allowance for Doubtful Accounts
During the year 2011, the following selected transactions occurred:
a) Sales totalled $2,960,000 of which 25% were cash sales(cost of sales $1,804,000)
b) Sales returns were $114,000, half regarding credit sales. The returned merchandie was scrapped
c) Several accounts were written off; $39,000
d) Collections from credit customers totaled $1,880,000(excluding the recover in (c) above.
1.Journalize transactions (a) through (e).
2. Prepare the December 31,2011 adjusting entry to estimate bad debts assuming that uncollectible accounts are estimated to be 1% net credit sales.
3. Show how accounts receivable will appear on the December 31,2011 balance sheet
4. What will bad debt expense be on the income statement for the year ended December 31,2011
5.Prepare the December 31, 2011 adjusting entry to estimated bad debts assuming that uncollectible accounts are estimated to be 3% of outstanding receivables.
6. Show how accounts receivable will appear on the December 31, 2011 balance sheet
7. What will bad debt expense be on the income statement for the year ended December 31,2011
The solution explains the calculations and journal entries relating to bad debt expense and allowance for uncollectible accounts