Blunt Company makes credit sales of $25,000 during the month of February 2019. During 2019, collections are received on February sales of $24,500, accounts representing $500 of these sales are written off as uncollectible, and a $100 account previously written off is collected.

Required:

1.Prepare the journal entries necessary to record the preceding information if (a) bad debts are estimated as 3% of credit sales at the time of sale and (b) the bad debts are recorded as they actually occur.

2.Next Level Which methodrecording bad debts at the time of sale or when they actually occuris preferred? Why?

CHART OF ACCOUNTS

Blunt Company

General Ledger

ASSETS
111	Cash
121	Accounts Receivable
122	Allowance for Doubtful Accounts
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

1a. Assume that bad debts are estimated as 3% of credit sales at the time of sale. Prepare the journal entries to record the credit sales for February and the related estimate of uncollectible accounts on February 28. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

1a. Assume that bad debts are estimated as 3% of credit sales at the time of sale. Prepare the journal entries to record the credit sales for February and the related estimate of uncollectible accounts on February 28. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

General Journal Instructions

All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback.

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GENERAL JOURNAL

Score: 2/151

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Points:

0.4 / 30

Feedback

Check My Work

When a company estimates bad debts based on sales, the journal entry is a made before specific accounts are deemed uncollectible. This instruction tells you to record the entry for February credit sales on February 28. When a company determines that an individual amount is uncollectible, it writes off that amount, removing it from the customers account. Occasionally a company will receive payment from a customer for an amount that has already been written off. Most accountants favor reestablishing the amount owed and then recording the payment.

1b. Assume that the bad debts are recorded as they actually occur. Prepare the journal entry on February 28 to record the credit sales for February. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

General Journal Instructions

All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback.

PAGE 1

GENERAL JOURNAL

Score: 2/126

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