Problem 3 (10 points)

1. Rays Game Place sells all the hottest gear and video games. On January 1, 2020, Rays had the following account balances:

Accounts receivable $31,000

Less: Allowance for Doubtful Accounts (8,000)

Net accounts receivable $23,000

A. During 2020, Rays wrote off $9,500 in uncollectible accounts. Make this journal entry.

B. One account in the amount of $400 that had been written off in (a) above was collected. Make the journal entries to reinstate the account and show its collection.

C. During 2020, Rays made credit sales of $135,000 and collected $105,000 of accounts receivable. Record these journal entries.

D. At the end of the year, Rays determines that approximately 7 percent of its ending accounts receivable balance will not be collected. Rays uses the percentage of receivables method for calculating bad debts. Make the necessary journal entry. (Hint: It may help to use T-accounts for accounts receivable and the allowance for doubtful accounts. Make sure to post the beginning balances and the transactions above to the affected T- accounts. This will help you calculate the proper target balance and the amount for bad debt expense).