Barrie Supplies uses the allowance method for accounting for uncollectible accounts with the estimate based on an aging of accounts receivable. The company had the following account balances on September 30, 2014:
Accounts Receivable. ..................................................... $498,000
Allowance for Doubtful Accounts (credit balance) .................. 56,000
The following transactions took place during the month of October 2014:
Oct. 2 Albert Morrison, who owes $40,000, is unable to pay on time and has given a 20-day, 8 percent note in settlement of the account.
Oct. 6 Received from Al Klassen the amount owed on a September 6 dishonoured note, plus extra interest for 30 days at 4% computed on the maturity value of the note ($15,300). This dishonoured note had been converted to an Account Receivable on September 6.
9 Received notice that a customer (Will Wong) has filed for bankruptcy. Wong owes $35,000. The courts will confirm the amount recoverable at a later date.
11 Determined the account receivable for Susan Knight ($7,200) was uncollectible and wrote it off.
18 Received a cheque from the courts in the amount of $23,000 as final settlement of Wong's account.
22 Morrison paid the note received on October 2.
25 Determined the account receivable for Donald Purcell ($8,200) was uncollectible and wrote it off.
31 Sales for the month totalled $743,000 (of which 95 percent were on account) and collections on account totalled $520,000.
31 Barrie Supplies did an aging of accounts receivable that indicated that $60,000 is expected to be uncollectible. The company recorded the appropriate adjustment.
Required
1. Record the above transactions in the general journal.
2. What would be the adjusting entry required on October 31 if the company used the percent-of-sales method with an estimate of uncollectibles equal to 4 percent of sales on account?
3. Which of the two methods of estimating uncollectible accounts would normally be more accurate? Why?