Question
During the year ended December 31, 2018, Kellys Camera Shop had sales revenue of $195,000, of which $97,500 was on credit. At the start of
During the year ended December 31, 2018, Kellys Camera Shop had sales revenue of $195,000, of which $97,500 was on credit. At the start of 2018, Accounts Receivable showed a $12,000 debit balance and the Allowance for Doubtful Accounts showed a $650 credit balance. Collections of accounts receivable during 2018 amounted to $73,000.
Data during 2018 follow:
- On December 10, a customer balance of $1,750 from a prior year was determined to be uncollectible, so it was written off.
- On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.
Required:
1. Give the required journal entries for the two events in December.
1. a. Record the write-off of a certain customer account from a prior year which is not collectible totaling $1,750.
2. Record the estimated bad debt losses at 2 percent of credit sales for the year.
2. a. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2018.
Kelly's Camera Shop | |
Income Statement (partial) | |
Year ending December 31, 2018 | |
Operating Expenses |
2. b. Show how the amounts related to Accounts Receivable would be reported on the balance sheet?
Kelly's Camera Shop | |
Balance Sheet (partial) | |
At December 31, 2018 | |
Current Assets |
3. On the basis of the data available, does the 2 percent rate appear to be reasonable?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started