This problem continues the Davis Consulting situation from Problem P7-33 of Chapter 7. Davis reviewed the receivables list from the January transactions. Davis uses the allowance method for receivables, estimating uncollectibles to be 5% of January credit sales, $ 4,500. Davis identified on February 15 that a customer was not going to pay his receivable of $ 200.

Requirements

1. Journalize the January 31 entry to record and establish the allowance using the percent-of-sales method for January credit sales.

2. Journalize the entry to record the write- off of the customer’s bad debt.