Question 2

The December 31, 2007 balance sheet of Quayle Company had Accounts Receivable of $500,000 and a credit balance in Allowance for Doubtful Accounts of $33,000.

During 2008, the following transactions occurred:

Sales on account $1,400,000;

Sales returns and allowances, $50,000;

Collections from customers, $1,150,000;

Accounts written off $35,000;

Previously written off accounts of $5,000 were collected.

Required:

(a) Journalize the 2008 transactions.

(b) If the company uses the percentage of receivables basis to estimate bad debts expense and determines that uncollectible accounts are expected to be 4% of accounts receivable, what is the adjusting entry at December 31, 2008?