1. The December 31, 2019 balance sheet of Barone Company had Accounts Receivable of $400,000 and a credit balance in Allowance for Doubtful Accounts of $32,000. During 2020, the following transactions occurred: sales on account $1,500,000; sales returns and allowances, $50,000; collections from customers, $1,250,000; accounts written off $36,000; previously written off accounts of $6,000 were collected.

Instructions

(a) Journalize the 2020 transactions.

(b) If the company uses the percentage-of-sales basis to estimate bad debt expense and anticipates 3% of net sales to be uncollectible, what is the adjusting entry at December 31, 2020?

(c) If the company uses the percentage of receivables basis to estimate bad debt expense and determines that uncollectible accounts are expected to be 8% of accounts receivable, what is the adjusting entry at December 31, 2020?

(d) Which basis would produce a higher net income for 2020 and by how much?

2. Para Float Company often requires customers to sign promissory notes for major credit purchases. Journalize the following transactions for Para Float Company.

Feb. 12 Accepted a $30,000, 4%, 60-day note from Yancy Blair for a 24-foot motorboat built to his specifications.

April 14 Received notification from Yancy Blair that he was unable to honor his promissory note but that he expects to pay the amount owed in May.

May 26 Received a check from Yancy Blair for the total amount owed.

June 10 Received notification by the bank that Yancy Blair check was being returned "NSF" and that Mr. Blair had declared personal bankruptcy.