Past experience indicates that 2% of net credit sales will eventually be uncollectible for the Elmerez Rental Company. Selected general ledger account balances at December 31, 2007, and December 31, 2008, appear below:

2007 2008

Sales $421,000 $526,500

Sales returns and allowances 21,000 26,500

Accounts Receivable 80,000 100,000

Allowance for Doubtful Accounts 3,000 ?

Instructions ( 8 Marks)

(a) Record the following events in 2008.

Aug. 10, Determined that the account of Henry Hum for $2,500 is uncollectible.

Sept. 12, Determined that the account of Mark Pippy for $4,000 is uncollectible.

Oct. 10, Received a cheque for $1,800 as payment on account from Henry Hum, whose account had previously been written off as uncollectible. He indicated the remainder of his account would be paid in November.

Nov. 15, Received a cheque for $700 from Henry Hum as payment on his account.

(b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31, 2008.

(c) What is the balance of Allowance for Doubtful Accounts at December 31, 2008?