Account ReceivableEntries

The following financial information pertains to Sleepy Company:

Accounts Receivable 12/31/11 $275,000

Allowance for bad debt 12/31/11 $8,400

Net Credit Sales 2012 $1,980,000

Collect on credit sales during 2012 $1,730,000

Accounts receivable written off in 2012 $6,500

Required:

a.Prepare all the necessary journal entries for 2012 sales, collections, and write-offs (using thedirect write-off method).

b.(i) Using the allowance method, prepare 2012 journal entries to record write-offs and to estimatebad debt expenseassuming bad debt expense is estimated on a percentage of net credit sales approach (2%).

(ii) Using theallowance method, prepare 2012 journal entries to record write-offs and to estimate bad debt expense assuming bad debt expense is estimated on a percentage of accounts receivable approach (5%).