The Ideal Plumbing Company provides plumbing installation for both business and individual customers. The company records sales for the two types of customers in separate Sales accounts. The company's experience has been that each type of sales has a different rate of losses from uncollectible accounts. Thus, the total that the company charges off for these losses at the end of each accounting period is based on two computations (one computation for each sales account). The firm uses the percentage of net credit sales method.

As of December 31, 2016, Accounts Receivable has a balance of $281,500, and Allowance for Doubtful Accounts has a credit balance of $600. The following table provides a breakdown of the credit sales by division for the year 2016 and the estimated rates of loss:

Division ............ Amount ..............Rate of Loss

Business ...........$1,800,000 .................. 0.4%

Individual ......... 1,200,000 ................... 0.9%

Instructions

1. Compute the estimated amount of losses in uncollectible accounts expense for each of the two types of sales for the year.

2. Prepare an adjusting entry in general journal form to provide for the estimated losses from uncollectible accounts. Use Uncollectible Accounts Expense and Allowance for Doubtful Accounts.

3. Show how Accounts Receivable and Allowance for Doubtful Accounts should appear on the balance sheet of Ideal Plumbing Company as of December 31, 2016.

4. On January 28, 2017, the account receivable of Fain Enterprises, amounting to $788, is determined to be uncollectible and is to be written off. Record the transaction in general journal form.

5. On June 15, 2017, the attorneys for Ideal Plumbing Company turned over a check for $400 that they obtained from Fain Enterprises in settlement of their account, which had been written off on January 28, 2017. The money has already been entered in the cash receipts journal. Record the general journal entry to reinstate the proper amount of Fain's account.

Analyze: Assume that Ideal Plumbing Company uses a predetermined 7.0 percent rate on total accounts receivable to compute the estimated amount of uncollectible accounts receivable. What would be the amount charged to Uncollectible Accounts Expense on December 31, 2016?