Trial balance was prepared for Tile, Etcetera, Incorporated, on December $31,$ Year $1,$ after the closing entries were posted. 

 

Account Title Debit Credit

Cash $$180,000$

Accounts receivable $139,000$

Allowance for doubtful accounts $$25,000$

Inventory $453,000$

Accounts payable $109,000$

Common stock $520,000$

Retained earnings $118,000$

Totals $$772,000$ $$772,000$

Tile, Etcetera had the following transactions in Year $2$:

Purchased merchandise on account for $$650,000.$

Sold merchandise that cost $$490,000$ for $$1,030,000$ on account.

Sold for $$315,000$ cash merchandise that had cost $$188,000.$

Sold merchandise for $$260,000$ to credit card customers. The merchandise had cost $$124,000.$ The credit card company charges a $4$ percent fee.

Collected $$760,000$ cash from accounts receivable.

Paid $$680,000$ cash on accounts payable.

Paid $$159,000$ cash for selling and administrative expenses.

Collected cash for the full amount due from the credit card company $($see item $4).$

Loaned $$64,000$ to J$.$ Parks. The note had an $9$ percent interest rate and a one$-$year term to maturity.

Wrote off $$8,900$ of accounts as uncollectible.

Made the following adjusting entries:

$($a$)$ Recorded uncollectible accounts expense estimated at $1$ percent of sales on account.

$($b$)$ Recorded seven months of accrued interest on the note at December $31,$ Year $2($see item $9).$

Required

Prepare general journal entries for these transactions, and post the entries to T$-$accounts. Also, prepare an income statement, a statement of changes in stockholders equity, a balance sheet, and a statement of cash flows for Year $2.$

Compute the net realizable value of accounts receivable at December $31,$ Year $2.$

If Tile, Etcetera used the direct write$-$off method, what amount of uncollectible accounts expense would it report on the income statement?