Analyzing and Reporting Receivable Transactions and Uncollectible Accounts Using Percentage- of-Sales Method to Estimate Bad Debt Expense

At the beginning of the year, Penman Company had the following account balances.

Accounts receivable...................... $356,000

Allowance for uncollectible accounts......... 21,400

During the year, Penmans credit sales were $2,008,000, and collections on accounts receivable were $1,963,000. The following additional transactions occurred during the year.

Feb. 17 Wrote off Bavas account, $8,200.

May 28 Wrote off Reeds account, $4,800.

Dec. 15 Wrote off Fischers account, $2,300.

Dec. 31 Recorded the bad debts expense assuming Penmans policy is to record bad debts expense as 0.9% of credit sales. (Hint: The allowance account is increased by 0.9% of credit sales

regardless of write-offs.)

Compute the ending balances in accounts receivable and the allowance for uncollectible accounts. Show how Penmans December 31 balance sheet reports the two accounts