PROBLEM III (20 pts)

Air King Corp has accounts receivable balance of $150,000 on December 31, 2020. It has a debit balance of $3,000 in Allowance for Doubtful Account prior to adjustment, on December 31, 2020. The company uses the ageing of accounts receivable for estimating uncollectible accounts. The companys estimated uncollectible accounts are as shown below.

Age of Accounts Dec. 31, 2020 Estimated % Uncollectible

Current $100,000 1%

1-30 days past due 20,000 10%

31- 9 days past due 15,000 20%

91-180 days past due 10,000 40%

Over 180 days past due 5,000 50%

$150,000

During 2021, Air King Corp. Had net credit sales of $1,000,000 and collections of $950,000. It wrote off uncollectible accounts receivable of $9,500. However, a $1,500 account previously written off was recovered before the end of the year. Air King Corporation estimates that 8% of its accounts receivable at 12/31/2021 will be uncollectible.

REQUIRED

1. Prepare the journal entry to record the bad debt expense at 12/31/2020.

2. Prepare the journal entries to record sales and collection during 2021.

3. Prepare the journal entry to record the write-off of uncollectible accounts during 2021.

4. Prepare the journal entries to record the recovery of uncollectible accounts during 2021.

E. Determine the ending balance of accounts receivable and the unadjusted balance in llowance for Doubtful Accounts for at 12/31/2021.

6. Prepare the journal entry to record the bad debt expense at 12/31/2021.

7. Indicate how the accounts receivable will be reported on the 12/31/2021 balance sheet.