By the end of its first year of operations, Previts Corporation has credit sales of $670,000 and accounts receivable of $270,000. Given its the first year of operations, Previts management is unsure how much allowance for uncollectible accounts it should establish. One of the companys competitors, which has been in the same industry for an extended period, estimates uncollectible accounts to be 3% of ending accounts receivable, so Previts decides to use that same amount. However, actual write-offs in the following year were 15% of the $270,000 (= $40,500). Previts inexperience in the industry led to making sales to high credit risk customers.

Problem 5-7B Part 1 Required 1. Record he adjustment or uncollectible accounts at the end of the first year o operations using he 3% estimate of accounts re e transaction/event, select "No journal entry required" in the first account field.) able ff n entr s e u e o a View transaction list Journal entry worksheet Record the adjustment entry for uncollectible accounts. Note: Enter debits before credits. Transaction General Journal Debit Credit Bad debt expense Allowance for uncollectible accounts Record entry Clear entry View general journal