Accounting for Receivables and Warranty Obligations Douglas Company sells furniture. Approximately 10% of its sales are cash; the remainder are on credit. During the year ended December 31, 2009, the company had net credit sales of

$2,200,000. As of December 31, 2009, total accounts receivable were $800,000, and Allowance for Bad Debts had a debit balance of $1,100 prior to adjustment. In the past, approximately 1% of credit sales have proved to be uncollectible. An aging analysis of the individual accounts receivable revealed that $32,000 of the Accounts Receivable balance appeared to be uncollectible.

The largest credit sale during the year occurred on December 4, 2009, for $72,000 to Aaron Company. Terms of the sale were 2/10, n/30. On December 13, Aaron Company paid $60,000 of the receivable balance and took advantage of the 2% discount. The remaining $12,000 was still outstanding on March 31, 2010, when Douglas Company learned that Aaron Company had declared bankruptcy. Douglas wrote the receivable off as uncollectible.
On December 31, 2009, Douglas Company estimated that it would cost $11,000 in labor and various expenditures to service the furniture it had sold (under 90-day warranty agreements)
during the last three months of 2009. During January 2010, the company spent $430 in labor and $600 for supplies to perform service on defective furniture that was sold during the year 2009.
Required:
Prepare the following journal entries:
1. The sale of $72,000 of furniture on December 4, 2009, to Aaron Company on credit.
2. The collection of $58,800 from Aaron Company on December 13, 2009, assuming the company allows the discount on partial payment.
3. Record Bad Debt Expense on December 31, 2009, using the percentage of credit sales method.
4. Record Bad Debt Expense on December 31, 2009, using the aging of receivables method.
5. Record estimated warranty expense on December 31, 2009.
6. Record actual expenditures to service defective furniture under the warranty agreements on January 31, 2010.
7. Write off the balance of the Aaron Company receivable as uncollectible, March 31, 2010.