Rice Automotive ended December 2012 with Accounts Receivable of $30,000 and Allowance for Doubtful Accounts of $1,500. During January 2013, Rice Automotive completed the following transactions:
• Sales of $180,000, which included $120,000 in credit sales and $60,000 of cash sales.
• Cash collections on account, $90,000.
• Write-offs of uncollectible receivables, $1,200.
• Bad debt expense, estimated as 2% of credit sales.
1. Prepare journal entries to record sales, collections, write offs of un-collectibles, and Bad Debt Expense by the percentage-of-sales method.
2. Calculate the ending balances in Accounts Receivable, Allowance for Doubtful Accounts, and net Accounts Receivable at January 31. How much does Rice Automotive expect to collect?