Lake Air Jewelry Company completed the following selected transactions during 19X1 and 19X2:

\section*{19X1}

Dec. 31 Began using the allowance method to account for uncollectibles. Estimated that uncollectible-account expense for the year was 1 percent on credit sales of \(\$ 450,000\) and recorded that amount as expense. The accounts receivable balance is \(\$ 142,000\).

31 Made the appropriate closing entry.

\(19 \mathrm{X} 2\)

Feb. 4 Sold inventory to Ed Davis, \(\$ 2,521\), on credit terms of \(2 / 10 \mathrm{n} / 30\).

July 1 Wrote off Ed Davis's account as uncollectible after repeated efforts to collect from him.

Oct. 19 Received \(\$ 521\) from Ed Davis, along with a letter stating his intention to pay his debt in full within 30 days. Reinstated his account in full.

Nov. 15 Received the balance due from Ed Davis.

Dec. 31 Made a compound entry to write off the following accounts as uncollectible: Kris Moore, \$899; Marie Mandue, \$530; and Grant Frycer, \$672.

31 Observed that collection losses are lower than expected. Estimated that uncollectibleaccount expense for the year was \(1 / 2\) of 1 percent on credit sales of \(\$ 540,000\) and recorded the expense.

31 Made the appropriate closing entry.

\section*{Required}
1. Open general ledger accounts for Allowance for Uncollectible Accounts and UncollectibleAccount Expense. Keep running balances.
2. Record the transactions in the general journal, and post to the two ledger accounts.
3. The December 31, 19X2, balance of Accounts Receivable is \(\$ 169,300\). Show how Accounts Receivable would be reported at December 31, 19X1 and 19X2. Why do you think Lake Air decreased its uncollectible accounts percentage from 1 percent to \(1 / 2\) of 1 percent in 19X2?
4. Assume that Lake Air Jewelry Company begins aging its accounts receivable on December 31, 19X2. The balance in Accounts Receivable is \(\$ 169,300\), the credit balance in Allowance for Uncollectible Accounts is \(\$ 2,399\), and the company estimates that \(\$ 5,099\) 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, 19X2, balance sheet. Compare net accounts receivable at December 31, 19X2, with the amount reported in Requirement 3 above. Why do you think the two sets of figures agree or disagree?
Using the percentage of sales and aging approaches for uncollectibles (Obj. 2, 6)