Selected unadjusted account balances at December 31, 2014, are shown below for Demron Servicing.

Required
a. Demron estimates that 1.5% of net credit sales will prove to be uncollectible. Prepare the adjusting entry required on December 31, 2014, to estimate uncollectible receivables.
b. During 2015, credit sales were $620,000 (cost of sales $406,500); sales discounts of $12,000 were taken when accounts receivable of $440,000 were collected; and accounts written off during the year totaled $10,000. Prepare the entries for these transactions.
c. Record the adjusting entry required on December 31, 2015, to estimate uncollectible receivables assuming it is based on 1.5% of net credit sales.
d. Show how accounts receivable would appear on the December 31, 2015, balance sheet.
Analysis Component:
Comment on the advantages and disadvantages of using the income statement approach for estimating uncollectible.

Transcribed Image Text:

Debit $70,000 Account Credit Accounts receivable. Allowance for doubtful accounts Sales (all on credit) Sales discounts 1,100 480,000 8,000