Problem 9-8A Eastern Supply uses the allowance method in accounting for uncollectible accounts with Using the allowance method of estimate based on the aging-of-accounts-receivable method. The company had the fol- accounting for uncollectibles lowing account balances on August 31, 2017: estimating uncollectibles by the percent-of-sales and the aging- of-accounts-receivable methods, accounting for notes receivable Accounts Receivable 2 72,600- Allowance for Doubtful Accounts (credit balance) 2. Bad Debt Expense, debit, $48,960 The followving transactionstok plce during September 20172 Sep. 2 Elbow Inc, which owes $48,000, is unable to pay on time and has given a 25-day, 8 percent note in settlement of the account. Received from Irma Good the amount owed on an August 7 dishonoured note, plus extra interest for 30 days at 4 percent computed on the maturity value of the note ($12,600). This dishonoured note had been converted to an account receivable on August 7 6 9 Received notice that a customer (Tony Goad) has filed for bankruptcy Goad owes $19,200. The courts will confirm the amount recoverable at a later date. Determined the account receivable from Kay Walsh ($9,120) was uncollect- ible and wrote it off. Received a cheque from the courts in the amount of $15,000 as final settle- ment of Goad's account. Elbow Inc. paid the note received on September 2. 11 18 27 27 Determined the account receivable for Dave Campbell ($5,040) was uncol- 30 Sales for the month totalled $720,000 (of which 85 percent were on account) 3 Eastern Supply did an aging of accounts receivable that indicated that lectible and wrote it off. and collections on account totalled $601,200 $75,000 is expected to be uncollectible. The company recorded the appro- priate adjustment. Chapter 9 Receivables 547