Exercise 8-3

The ledger of Costello Company at the end of the current year shows Accounts Receivable $120,000, Sales Revenue $842,000, and Sales Returns and Allowances $29,000.

(a) If Costello uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Costello determines that L. Doles $2,500 balance is uncollectible. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date Account Titles and Explanation Debit Credit

Dec. 31 ?

?

(b) If Allowance for Doubtful Accounts has a credit balance of $3,200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 2% of net sales, and (2) 12% of accounts receivable. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No. Date Account Titles and Explanation Debit Credit

(1) Dec. 31 ?

?

(2) Dec. 31 ?

?

(c) If Allowance for Doubtful Accounts has a debit balance of $220 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales and (2) 7% of accounts receivable. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No. Date Account Titles and Explanation Debit Credit

(1) Dec. 31 ?

?

(2) Dec. 31 ?

?