E6-11 (Algo) Determining Financial Statement Effects of Bad Debts Using the Percentage of Credit Sales Method LO6-2

During the current year, Sun Electronics, Incorporated, recorded credit sales of $730,000. Based on prior experience, it estimates a 1 percent bad debt rate on credit sales.

a. On November 13 of the current year, an account receivable for $340 from a prior year was determined to be uncollectible and was written off.

b. At year-end, the appropriate bad debt expense adjustment was recorded for the current year.

Required:

Show the effects of the above transactions on the following categories: Assets, Liabilities, and Stockholders' Equity. Indicate the accounts affected and enter decreases to account categories with a minus sign.