At December 31, Vicki's Designers had gross accounts receivable of $346,000. Historically, Vicki's Designers has estimated bad debt expense as 5% of gross receivables.
a. Calculate bad debt expense for the year, assuming that the allowance account currently has (1) a credit balance of $5,000 and (2) a debit balance of $1,200.
b. Assume that on January 14, an account receivable of $2,000 is deemed uncollectible and written off. Prepare the journal entry to record this event. What effect does this have on (1) net income and (2) the net realizable value of receivables?