Individual Assignment: Recording Accounts and Notes Receivable Transactions; Estimating Bad Debts

Clayco Company completes the following transactions during the year.

July 14	Writes off a $750 account receivable arising from a sale to Briggs Company that dates to 10 months ago. (Clayco Company uses the allowance method.)
July 30	Clayco Company receives a $1,000, 90-day, 10% note in exchange for merchandise sold to Sumrell Company (the merchandise cost $600)
Aug 15	Receives $2,000 cash plus a $10,000 note from JT Co. in exchange for merchandise that sells for $12,000 (its cost is $8,000). The note is dated August 15, bears 12% interest, and matures in 120 days
Nov 1	Completes a $200 credit card sale with a 4% fee (the cost of sales is $150). The cash is transferred immediately from the credit card company
Nov 3	Sumrell Company refuses to pay the note that was due to Clayco Company on October 28. Prepare the journal entry to charge the dishonored note plus accrued interest to Sumrell Companys accounts receivable.
Nov 5	Completes a $500 credit card sale with a 5% fee (the cost of sales is $300). The cash is transferred immediately from the credit card company.
Nov 15	Receives the full amount of $750 from Briggs Company that was previously written off on July 14. Record the bad debts recovery.
Dec 13	Receives payment of principal plus interest from JT for the August 15 note.

Required

1. Prepare Clayco Companys journal entries to record these transactions.

2. Prepare a year-end adjusting journal entry as of December 31 for each separate situation.

1. Bad debts are estimated to be $20,400 by aging accounts receivable. The unadjusted balance of the Allowance for Doubtful Accounts is a $1,000 debit.
2. Alternatively, assume that bad debts are estimated using the percent of sales method. The Allowance for Doubtful Accounts had a $1,000 debit balance before adjustment, and the company estimates bad debts to be 1% of its credit sales of $2,000,000.