Question

During the year ended December 31, 2015, Kelly’s Camera Shop had sales revenue of $140,000, of which $70,000 was on credit. At the start of 2015, Accounts Receivable showed a $11,000 debit balance and the Allowance for Doubtful Accounts showed a $540 credit balance. Collections of accounts receivable during 2015 amounted to $62,000.

     Data during 2015 follow:

a.	On December 10, a customer balance of $1,200 from a prior year was determined to be uncollectible, so it was written off.
b.	On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.

Required:

1.

Give the required journal entries for the two events in December. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Record the write-off of a certain customer account from a prior year which is not collectible totaling $1,200.

Record the estimated bad debt losses at 2 percent of credit sales for the year.

Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2015.

      

      

Answer 1

Journal entries :

Date	account and explanation	debit	credit
	Allowance for doubtful account	1200
	Account receivable		1200
	(To record write off)
	Bad debt expense (70000*2%)	1400
	Allowance for doubtful account		1400
	(To record bad debt expense)

Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2015.

Current assets
Account receivable	17800
Less; Allowance for doubtful accounts	740	17060

Income statement

Expenses
Bad debt expense	1400