Majestic Equipment Sales Company, which sells only on account, had a $129,000 balance in its Accounts Receivable and a $4,900 balance in its Allowance for Doubtful Accounts on December 31, 2015. During 2016, the company's sales of equipment were $824,000 (All sales were on account) and its total cash collections from customers were $800,000. During the year, the company concluded that customers with accounts totalling $6,900 would be unable to pay, and wrote these receivables off. However, one of these customers subsequently made a payment of $850 (note that this amount is not included in the cash collections noted above). At the end of 2016, management decided that it would use an estimate for bad debts of 1% of its credit sales.

Prepare the journal entries to record all the 2016 transactions, including the adjustment for bad debts expense at year end Account Titles and Explanation Accounts Receivable Debit Credit 824000 Sales Revenue 824000 To record sales) Cash 800000 Accounts Receivable 800000 To record cash collected from customers) Bad Debts Expense 6900 Accounts Receivable To write off accounts receivable) Accounts Receivable 6900 850 Bad Debts Expense 850 (To reinstate an account that were previously written off) Cash 850 Accounts Receivable 850 To record recovery of account that were previously written off) Bad Debts Expense 6900 Accounts Receivable 6900 To recognize the bad debts expense)