Instructions Chart of Accounts Kandel Company had the following data available for 2016 (before making any adjustments): CHART OF ACCOUNTS Accounts receivable, 12/31/16 $320,100 (Dr.) Kandel Company Allowance for doubtful accounts 2,600 (Cr.) General Ledger Net credit sales, 2016 B34,000 (Cr.) ASSETS REVENUE 111 Cash 411 Sales Revenue Required: 1. Prepare the journal entry to recognize bad debts under the following assumptions: (a) bad debts expense is expected to be 2% of net credit sales for the year and (b) Kandel expects it will not be able to collect 5% of the balance in accounts receivable at year-end. 2. Assume instead that the balance in the allowance account is a $2,600 debit. How will this affect your answers to part (1)? 121 Accounts Receivable 122 Allowance for Doubtful Accounts EXPENSES 500 Cost of Goods Sold 141 Inventory 152 Prepaid Insurance 154 Supplies 521 Salaries and Wages Expense 532 Utilities Expense 533 Insurance Expense 1 174 Equipment 179 Accumulated Depreciation 534 Rent Expense 537 Supplies Expense 541 Depreciation Expense LIABILITIES 211 Accounts Payable 545 Bad Debts Expense 231 Salaries and Wages Payable 551 Advertising Expense 235 Notes Payable 559 Miscellaneous Expenses 261 Income Taxes Payable 810 Interest Expense 910 Income Tax Expense EQUITY 311 Capital Stock 331 Retained Earnings 1. Prepare the journal entry with the impact on the financial statements on December 31 to recognize bad debts under the following assumptions: (a) Bad debts expense is expected to be 2% of net credit sales for the year. (b) Kandel expects it will not be able to collect 6% of the balance in accounts receivable at year-end. General Journal Instructions PAGE 1 IMPACT ON FINANCIAL STATEMENTS GENERAL JOURNAL BALANCE SHEET INCOME STATEMENT DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY REVENUE EXPENSES NET INCOME 1 N 3 4 2. Assume instead that the balance in the allowance account is a $2,600 debit. How will this affect your answers to part (1)? (a) Based on 2% of net credit sales. (b) Based on 6% of year-end accounts receivable. PAGE 1 IMPACT ON FINANCIAL STATEMENTS GENERAL JOURNAL BALANCE SHEET INCOME STATEMENT DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY REVENUE EXPENSES NET INCOME 1 2 3 4