Problem 1

The Dent Sign Company uses the allowance method in accounting for uncollectible accounts. The company uses income statement approach to estimate uncollectible accounts. Past experience indicates that 1% of net credit sales will eventually be uncollectible. Selected account balances at December 31, 2017, and December 31, 2018, appear below:

12/31/1712/31/18

Net Credit Sales$400,000$500,000

Accounts Receivable75,000100,000

Allowance for Doubtful Accounts5,000?

Instructions

(a)Record the following events in 2018.

Aug.10Determined that the account of Ann Koch for $1,000 is uncollectible.

Sept.12Determined that the account of Joe Yates for $4,000 is uncollectible.

Oct.10Received a check for $550 as payment on account from Ann Koch, whose account had previously been written off as uncollectible. She indicated the remainder of her account would be paid in November.

Nov.15Received a check for $450 from Ann Koch as payment on her account.

(b)Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31, 2018.

(c)What is the balance of Allowance for Doubtful Accounts at December 31, 2018?