Delta Watches completed the following selected transactions during 2018 and 2019:
2018
Dec. 31 Estimated that bad debts expense for the year was 2% of credit sales of $450,000 and recorded that amount as expense. The company uses the allowance method.
31 Made the closing entry for bad debts expense.
2019
Jan. 17 Sold merchandise inventory to Mack Smith, $400, on account. Ignore Cost of Goods Sold.
Jun. 29 Wrote off Mack Smith's account as uncollectible after repeated efforts to collect from him.
Aug. 6 Received $400 from Mack Smith, along with a letter apologizing for being so late. Reinstated Smith's account in full and recorded the cash receipt.
Dec. 31 Made a compound entry to write off the following accounts as uncollectible:
Cam Carter, $1,400; Mike Venture, $1,200; and Russell Reeves, $400.
31 Estimated that bad debts expense for the year was 2% on credit sales of $510,000 and recorded the expense.
31 Made the closing entry for bad debts expense.
Requirements
1. Open T-accounts for Allowance for Bad Debts and Bad Debts Expense, assuming the accounts begin with a zero balance. Record the transactions in the general journal (omit explanations), and post to the two T-accounts.
2. Assume the December 31, 2019, balance of Accounts Receivable is $136,000. Show how net accounts receivable would be reported on the balance sheet at that date.