Question 2 (11 marks)

The following account balances were found for Blue Jays Corp. at the beginning of its fiscal year, January 1, 2020:

Accounts Receivable....................................................................... $1,240,250

Allowance for Doubtful Accounts................................................... (19,220)

Sales for the year were $8,100,000, of which 60% was on credit, and credit sales returns were $146,000. Cash collections were $5,416,000. In 2020, Blue Jays had also written off $62,500 of its accounts receivable due to probable delinquency. The companys credit and collection manager has estimated that 6% of outstanding accounts receivable are uncollectible.

Instructions

1. Calculate the amount of the net credit sales. (3 marks)
2. Using the allowance method, prepare the entry recording of the accounts receivable written off in 2020. (2 marks)
3. Calculate the bad debt expense for the year and record the appropriate journal entry. (4 marks)
4. Present the accounts receivable section on Blue Jays statement of financial position. Show both the gross and net amounts. (2 marks)