INSTRUCTIONS:

a. Prepare journal entries to record credit sales, collections on account, and the transactions and adjustments under the Allowance Method and Direct Writeoff Method.

b. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the December 31 balance sheet under both methods.

PS-7B. Journal Entries for Credit Losses At January 1, the Chesley Company had the following accounts on its books: Accounts recsivable Allowance for doubtful accounts 13,600 (credit) During the year, credit sales were $1,622,000 and collections on account were $1,588,000. The follow- ing transactions, among others, occurred during the year Jan. 11 Wrote off J. Smith's account, $5,600. Apr. 29 Wrote off B. Bird's account, $2,000 Nov. 15 Received $1,000 from B. Bird to pay a debt that had been written off April 29. This amount is not included in the $1,588,000 collections Dec. 5 Wrote off D. Finger's account, $4,300 1 In an adjusting entry, recorded the allowance for doubtful accounts at one percent of credit sales for the year