P8-7B. Journal Entries for Credit Losses At January 1, the Sherry Company had the following accounts on its books: Accounts receivable Allowance for doubtful accounts. $255,000 (debit) 13,600 (credit) During the year, credit sales were $1,750,000 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, $5,800. Apr. Nov. Dec. 29 Wrote off B. Bird's account, $2,500. 15 Received $1,500 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. 5 Wrote off D. Finger's account, $4,300. 31 In an adjusting entry, recorded the allowance for doubtful accounts at three percent of credit sales for the year. Required a. Prepare journal entries to record the credit sales, the collections on account, the transactions, and the adjustment. b. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on the Decem- ber 31 balance sheet. P8-8B. Credit Losses Based on Accounts Receivable At December 31, the Lange Company had a balance of $622,000 in its accounts receivable account and a credit balance of $7,500 in the allowance for doubtful accounts account. The company has aged its accounts as follows: Current 0-60 days past due 61-180 days past due Over 180 days past due $524,000 56,000 25,200 16,800 $622,000 In the past, the company has experienced credit losses as follows: two percent of current balances, six percent of balances 0-60 days past due, 20 percent of balances 61-180 days past due, and 30 percent of balances more than six months past due. The company bases its allowance for doubtful accounts on an aging analysis of accounts receivable. Required a. b. Prepare the adjusting journal entry to record the provision for credit losses for the year. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on the Decem- ber 31 balance sheet