The following information pertains to Bay Cabinet Company's sales on account and accounts receivable:

After several collection attempts, Bay Cabinet Company wrote off \(\$ 2,800\) of accounts that could not be collected. Bay estimates that uncollectible accounts expense will be 0.5 percent of sales on account.
Required

a. Prepare the general journal entries to:
(1) Record sales on account for 2011.
(2) Record cash collections from accounts receivable for 2011.
(3) Write off the accounts that are not collectible.
(4) Record the estimated uncollectible accounts expense for 2011.

b. Compute the following amounts:
(1) Using the allowance method, the amount of uncollectible accounts expense for 2011.
(2) Net realizable value of receivables at the end of 2011.

c. Explain why the uncollectible accounts expense amount is different from the amount that was written off as uncollectible.

Transcribed Image Text:

Accounts Receivable Balance, January 1, 2011 Allowance for Doubtful Accounts, January 1, 2011 Sales on Account, 2011 Cost of Goods Sold, 2011 Collections of Accounts Receivable, 2011 $125,400 3,250 875,000 620,000 910,000