Lee Management Consulting wants to follow generally accepted accounting principles and use the allowance method for receivables. Michael Lee, owner of Lee Management Consulting, has decided that the best way to estimate uncollectibles would be to calculate 3.5 percent of credit sales. He has operated for several months and has not done this yet.
On November 10, 2016, Michael reviewed the list of outstanding accounts. He has identified that Gene is not going to pay his $900 receivable from July 19.
On November 16, 2016, Michael offered another client, Jin Lo, the opportunity to turn the unpaid account into a $1,000 note receivable. The note would incur 6 percent interest and be paid in three months.
Required
1. Journalize the entry on November 1, 2016, to record and establish the allowance for doubtful accounts using the percent-of-sales method for prior months' credit sales, which totaled $45,000.
2. Journalize the entry to record Gene's bad debt.
3. Journalize the establishment of the note receivable.
4. Prepare the journal entry that will be recorded on the date the note is settled (assuming it is settled on the maturity date).