Question

Quality Watches completed the following selected transactions during 2013 and 2014:
2013
Dec. 31 Estimated that bad debts expense for the year was 2% of credit sales of $ 450,000 and recorded that amount as expense. 31 Made the closing entry for bad debts expense.
2014
Jan. 17 Sold merchandise inventory to Malcolm Monet, $ 700, on account. Ignore cost of goods sold.
Jun. 29 Wrote off Malcolm Monet’s account as uncollectible after repeated efforts to collect from him.
Aug. 6 Received $ 700 from Malcolm Monet, along with a letter apologizing for being so late. Reinstated Monet’s account in full and recorded the cash receipt.
Dec. 31 Made a compound entry to write off the following accounts as uncollectible: Brian Kemper, $ 1,600; May Milford, $ 1,000; and Ronald Richter, $ 400.
31 Estimated that bad debts expense for the year was 2% on credit sales of $ 460,000 and recorded the expense.
31 Made the closing entry for bad debts expense.

Requirements
1. Open T-accounts for Allowance for Bad Debts and Bad Debts Expense. Keep running balances, assuming all accounts begin with a zero balance.
2. Record the transactions in the general journal, and post to the two T-accounts.
3. Assume the December 31, 2014, balance of Accounts Receivable is $ 135,000. Show how net accounts receivable would be reported on the balance sheet at that date.



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  • CreatedJanuary 16, 2015
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