Exercise $7-6$

Recording and reporting allowance for doubtful accounts

P$2$

In its first year of operations, Cloudbox has credit sales of $$200,000.$ Its year$-$end balance in Accounts Receivable is $$10,000,$ and the company estimates that $$1,500$ of its accounts receivable is uncollectible.

a$.$ Prepare the year$-$end adjusting entry to estimate bad debts expense.

b$.$ Prepare the current assets section of Cloudbox$$s classified balance sheet assuming Inventory is $$22,000,$ Cash is $$14,000,$ and Prepaid Rent is $$3,000.$ Note: The company reports Accounts receivable, net on the balance sheet.