During the current year, A company had sales revenue of $334,000, of which $220,000 was on credit. At the start of the current year, Accounts Receivable showed a $110,000 debit balance, and the Allowance for Doubtful Accounts showed a $8,700 credit balance. Collections of accounts receivable during the current year amounted to $230,000.

A. Prepare the required journal entries for the following transactions that occurred during the year

1) An Account Receivable (B Company) of $7,700 from a prior year was determined to be uncollectible; therefore, it was written off immediately as a bad debt.

2) A company received a payment of $1,900 from B Company which was previously written off in transaction (1). (This amount is not included in the $220,000 collections.)

3) On December 31, on the basis of experience, a decision was made to continue the accounting policy of basing estimated bad debt losses on 3 percent of credit sales for the year.

B. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement and balance sheet for the current year. Disregard income tax considerations.