Koss Co. Ltd. began operations on January 1, 2015. It had the following transactions during 2015, 2016, and 2017.
2015 Dec. 31 Estimated uncollectible accounts as $5,000 (calculated as 2% of sales)
2016 Apr. 15 Wrote off the balance of N. Lang, $700
Aug. 8 Wrote off $3,000 of miscellaneous customer accounts as uncollectible
Dec. 31 Estimated uncollectible accounts as $4,000 (1½% of sales)
2017 Mar. 6 Recovered $200 from N. Lang, whose account was written off in 2016; no further recoveries are expected
Sept. 4 Wrote off as uncollectible $4,000 of miscellaneous customer accounts
Dec. 31 Estimated uncollectible accounts as $4,500 (1½% of sales).
Required:
1. Prepare journal entries to record the above transactions.
2. Assume that management is considering a switch to the balance sheet method of calculating the allowance for doubtful accounts. Under this method, the allowance at the end of 2017 is estimated to be $2,000. Comment on the discrepancy between the two methods of estimating allowance for doubtful accounts.