The Dream Kitchen is a small chain of kitchen remodeling stores. The company's year-end trial balance on December 31, 2016, included the information shown below:

Accounts Receivable .......................................... $990,440

Allowance for Doubtful Accounts (credit) .................... 28,200

Net credit sales for 2016, were $8,900,000. Allowance for Doubtful Accounts has not yet been adjusted.

Instructions

1. At the end of 2016, the following additional accounts receivable are deemed uncollectible:

Bob Anderson ................................... $10,800

Suzanne Bennett ................................... 2,180

James O'Brian ..................................... 4,200

Omar Tirado ........................................ 5,230

Casey Wilk ......................................... 3,100

Total ............................................. $25,510

Prepare the December 31, 2016, journal entry to write off the above accounts. Of the accounts to be charged off, $17,200 are more than 60 days past due, and $8,310 are from 31 to 60 days past due. Post this transaction to the T-accounts for Accounts Receivable and Allowance for Doubtful Accounts.

2. Assume that the company uses the percentage of sales method to estimate uncollectible accounts expense. After analyzing the prior year's activities, management determined that losses from uncollectible accounts for 2016 should be 0.32 percent of net credit sales. Prepare the necessary adjusting journal entry. Round calculation to nearest dollar.

3. Assume that the company uses the aging of accounts receivable method. The following information was furnished by the credit manager for use in calculating the estimated loss from uncollectible accounts. The balances of accounts were computed prior to the charge-offs in Instruction 1.

Receivable Category ___________ Estimated Loss Rate __________ Balances of Accounts (before charge-offs)

Current ...................................... 1% ............................................... $810,000

1-30 days past due ........................ 5% ................................................. 90,000

31-60 days past due ...................... 10% ................................................ 49,400

Over 60 days past due .................... 40% ............................................... 41,040

Total ............................................................................................. $990,440

Compute the estimated uncollectible accounts as of December 31, 2016, rounded to the nearest dollar.

4. Prepare the necessary adjusting journal entry to record the estimated uncollectible accounts expense on December 31, using the aging method. Post this entry to the T-accounts for Accounts Receivable and Allowance for Doubtful Accounts.

Analyze: If a company has used three different methods for estimating uncollectible accounts for the past three years, which basic accounting principle may have been violated? Why?