3. Chef Tony sells luxurious chocolate biscuits in Aurora. On January 1, 2019, the company had $17,000 in Accounts Receivable and $1,400 (cr.) in the Allowance for Doubtful Account (AFDA). During 2019, the company had sales revenue of $160,000, of which $70,000 was on credit. Collections of accounts receivable during the year were $58,000. Prior to year-end, Tony wrote off an account receivable for $1,300.

Required:

a. Open t-accounts for Accounts Receivable and AFDA and enter the beginning balances.

b. Prepare journal entries for the transactions during 2019 and post to the above accounts.

c. On December 31, the company estimated bad debts based on 2% of credit sales for the year. Prepare the necessary adjusting entry at year end and post to the above accounts.

d. Assume instead that Tonys uses the percentage of accounts receivable approach and estimates bad debts at 4% of the balance of accounts receivable at year-end. Prepare the necessary adjusting entry at year end and post to the above accounts.

e. Given your entries in d. above, what amount of accounts receivable does Tony expect to collect?