Question 8

The December 31, 2007 balance sheet of Quayle Company had Accounts Receivable of $500,000.

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 sales basis to estimate bad debts expense and expect 2% of net sales to be uncollected, what is the adjusting entry at December 31, 2008?