PART 1

Priestly Inc. records sales on account of $120,000 during the month of June. The company estimates bad debt expense as of 3% of credit sales.

1. Show the journal entry for the June sales on account (enter account name from the choices in the general instructions above, and then amount).

• Debit:
• Credit:

1. Show the journal entry for June's bad debt expense.

• Debit:
• Credit:

1. Assuming Priestly's opening balance of Accounts Receivable on June 1 was $0, what is its balance of net Accounts Receivable after these entries?

Just before closing its books on June 30, Priestly learns that one of its customers, the McKay Company, has run into financial difficultly and cannot pay an invoice totaling $2,300.Priestly decides to write off McKay's account.

1. Show the journal entry for the write-off.

• Debit:
• Credit:

1. What is Priestly's balance of net Accounts Receivable after the write-off?

On July 15, Priestly is pleasantly surprised to receive a check for $1,200 from McKay with a note saying the remainder of the balance due will be sent in two weeks.

1. Show the journal entry to reinstate McKay's account.

• Debit:
• Credit:

1. Show the journal entry to record McKay's payment of $1,200.

• Debit:
• Credit:

1. What is Priestly's balance of net Accounts Receivable after the entries pertaining to McKay?

PART 2

At the end of the current period, the accounting ledger of Blue Spruce Corp. shows an Accounts Receivable balance of $82,500 and Credit Sales of $762,240.The company has not yet recognized bad debt expense for the period.

Assume the Allowance for Doubtful Accounts has a credit balance of $1,080 in the trial balance, and that uncollectible accounts are expected to be 9% of gross Accounts receivable.Hint: this means the company will first determine the desired ending balance of the Allowance and then "back into" the required amount of bad debt expense.

1. Show the adjusting entry at the end the period to recognize bad debt expense.

• Debit:
• Credit:

1. What is the amount ofnetaccounts receivable after recording the entry above?

Now assume (instead of the scenario above) that the Allowance for Doubtful Accounts has adebitbalance of $480 in the trial balance, and that uncollectible accounts are expected to be 7% of gross Accounts receivable.(Note: A debit balance in the allowance occurs when write-offs in a period exceed the opening credit balance of the allowance.After we recognize bad debt expense, the allowance will once again have a credit balance, as is appropriate for a contra-asset account.)

1. Show the adjusting entry at the end the period to recognize bad debt expense.

• Debit:
• Credit:

1. What is the amount of net accounts receivable after recording the entry above?