E$8-3($Algo$)$ Recording, Reporting, and Evaluating a Bad Debt Estimate Using the Percentage of Credit

Sales Method $[$LO $8-2]$

During the year ended December $31,2021,$ Kelly's Camera Shop had sales revenue of $$190,000,$ of which $$95,000$ was on credit. At

the start of $2021,$ Accounts Receivable showed a $$11,000$ debit balance and the Allowance for Doubtful Accounts showed a $$640$

credit balance. Collections of accounts receivable during $2021$ amounted to $$72,000.$

Data during $2021$ follow:

a$.$ On December $10,$ a customer balance of $$1,700$ from a prior year was determined to be uncollectible, so it was written off.

b$.$ On December $31,$ a decision was made to continue the accounting policy of basing estimated bad debt losses on $2$ percent of credit

sales for the year.

Required:

Give the required journal entries for the two events in December.

$2-$a$.$ Show how the amounts related to Bad Debt Expense would be reported on the income statement.

$2-$b$.$ Show how the amounts related to Accounts Receivable would be reported on the balance sheet.

On the basis of the data available, does the $2$ percent rate appear to be reasonable?

Complete this question by entering your answers in the tabs below.

Req $1$

Req $2A$

Req $2$B

Req $3$

Show how the amounts related to Accounts Receivable would be reported on the balance sheet.