7. On Dec 31, 2019 financial statements of Joe Biden Construction Inc. had Accounts Receivable of $450,000 debit and Allowance for Doubtful Accounts of $32,000 credit. During 2019, the following transactions have occurred: net credit sales $2,600,000; collections from customers $2,350,000; accounts written off $30,000 and previously written off accounts of $2,000 were collected.

Instructions

(a) Journalize the 2019 transactions.

(b) If the company uses the percentage-of-sales basis to estimate bad debt expense and anticipates 5% of net sales to be uncollectible, what is the adjusting entry at December 31, 2019?

(c) If the company uses the percentage of receivables basis to estimate bad debt expense and determines that uncollectible accounts are expected to be 5% of accounts receivable, what is the adjusting entry at December 31, 2019?

(d) Which basis would produce a higher net income for 2019 and by how much?