Percent of sales allowance method (Learning Objective 4) 10–15 min.

Charly’s Automotive ended December 2013 with Accounts Receivable of $72,000 and a credit balance in Allowance for Uncollectible Accounts of $2,800. During January 2014, Charly’s Automotive completed the following transactions:

a. Sales of $273,000, which included $141,000 in credit sales and $132,000 of cash sales. Ignore cost of goods sold.

b. Cash collections on account, $128,000.

c. Write-offs of uncollectible receivables, $2,300.

d. Bad debt expense, estimated as 1% of credit sales.

Requirements 1. Prepare journal entries to record sales (ignore cost of goods sold), collections, write-offs of uncollectibles, and bad debt expense by the percent-of-sales method.

2. Calculate the ending balances in Accounts Receivable, Allowance for Uncollectible Accounts, and net Accounts Receivable at January 31, 2014. How much does Charly’s Automotive expect to collect?

AppendixLO1