Choices Clothing completed the following selected transactions during 2013 and 2014:
2013
Dec. 31 Estimated that bad-debt expense for the year was 3 percent of credit sales of $748,000 and recorded that amount as expense.
31 Made the closing entry for bad-debt expense.
2014
Feb. 17 Sold inventory to Bruce Jones, $1,412, on credit terms of 2/10, n/30. Ignore the cost of goods sold.
Jul. 29 Wrote off Jones' account as uncollectible after repeated efforts to collect from the customer.
Sept. 6 Received $1,150 from Jones, along with a letter stating his intention to pay his debt in full within 45 days. Reinstated the account in full.
Oct. 21 Received the balance due from Jones.
Dec. 31 Made a compound entry to write off the following accounts as uncollectible:
Sean Rooney, $1,610; Sargent Ltd., $3,075; and Linda Lod, $11,580.
31 Estimated that bad-debt expense for the year was 3 percent of credit sales of $860,000 and recorded the expense.
31 Made the closing entry for Bad-Debt Expense.
Required
1. Open three-column general ledger accounts for Allowance for Doubtful Accounts and Bad-Debt Expense. Keep running balances.
2. Record the transactions in the general journal and post to the two ledger accounts.
3. The December 31, 2014, balance of Accounts Receivable is $501,000. Show how Accounts Receivable would be reported at that date.
4. Assume that Choices Clothing begins aging its accounts on December 31, 2014. The balance in Accounts Receivable is $501,000, the credit balance in Allowance for Doubtful Accounts is $31,975, and the company estimates that $32,000 of its accounts receivable will prove uncollectible.
a. Make the adjusting entry for uncollectibles.
b. Show how Accounts Receivable will be reported on the December 31, 2014, balance sheet.