Choices Clothing completed the following selected transactions during 2016 and 2017:
2016
Dec. 31 Estimated that bad debt expense for the year was 3 percent of credit sales of $748,000 and recorded that amount as expense.
31 Made the closing entry for bad debt expense.
2017
Feb. 17 Sold inventory to Bruce Jones, $1,412, on credit terms of 2/10, n/30. Ignore the cost of goods sold.
Jul. 29 Wrote off Jones's account as uncollectible after repeated efforts to collect from the customer.
Sep. 6 Received $1,150 from Jones, along with a letter stating his intention to pay his debt in full within 45 days. Reinstated the account in full.
Oct. 21 Received the balance due from Jones.
Dec. 31 Made a compound entry to write off the following accounts as uncollectible: Sean Rooney, $1,610; Sargent Ltd., $3,075; and Linda Lod, $11,580.
31 Estimated that bad debt expense for the year was 3 percent of credit sales of $860,000 and recorded the expense.
31 Made the closing entry for the bad debt expense.
Required
1. Open three-column general ledger accounts for Allowance for Doubtful Accounts and Bad Debt Expense. Keep running balances.
2. Record the transactions in the general journal and post to the two ledger accounts.
3. The December 31, 2017, balance of Accounts Receivable is $501,000. Show how Accounts Receivable would be reported at that date.
4. Assume that Choices Clothing begins aging its accounts on December 31, 2017. The balance in Accounts Receivable is $501,000, the credit balance in Allowance for Doubtful Accounts is $31,975, and the company estimates that $32,000 of its accounts receivable will prove uncollectible.
a. Make the adjusting entry for uncollectibles.
b. Show how Accounts Receivable will be reported on the December 31, 2017, balance sheet.