See attached file for full problem description.
PART II — ACCOUNTS RECEIVABLE
A. ACCOUNTS RECEIVABLE—UNCOLLECTIBLE ACCOUNTS
Instructions: Present the journal entries specified below; show supporting calculations.
The trial balance of Friendly Company at December 31, 2003 includes the following:
Accounts Receivable 100,000
Allowance for Doubtful Accounts 500
Sales (all on credit) 600,000
Sales Returns and Allowances 60,000
(1) If Friendly uses the aging method and estimates that $5,000 of receivables will be uncollectible, prepare the December 31, 2003 adjusting entry.
(2) If Friendly estimates uncollectibles at 1% of net credit sales, prepare the appropriate adjusting entry for December 31, 2003.
(3) Assume that on February 10, 2004 the specific account of Mark Shaw with a balance of $600, is deemed uncollectible. Record the write-off.
(4) Assume that on May 12, 2004 Shaw pays one-half of the above balance in full and is expected to pay the remainder within 30 days. Record the appropriate entries.
B. SALE OF ACCOUNTS RECEIVABLE
Instructions: Present the journal entries specified below.
(2) On July 31, 2004 American Express remits cash to Stone Company in settlement of credit card billings of $2,000 less a 2.5% service fee. Record the settlement on the books of Stone Company.
The solution goes over uncollected accounts and records the settlements in accounting entries.