Question

During the year ended December 31, 2018, Kelly's Camera Shop had sales revenue of $190,000, of which $95,000 was on credit. At the start of 2018, Accounts Receivable showed a $11,000 debit balance and the Allowance for Doubtful Accounts showed a $640 credit balance. Collections of accounts receivable during 2018 amounted to $72,000. Data during 2018 follow: a. On December 10, a customer balance of $1,700 from a prior year was determined to be uncollectible, so it was written off. b. On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year Required: 1. Give the required journal entries for the two events in December 2. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2018, 3. On the basis of the data available, does the percent rate appear to be reasonable? Complete this question by entering your answers in the tabs below. Req 2B Req 3 Req 1 Req 2A Give the required journal entries for the two events in December. (If no entry is required for a transaction,/event, select "No Journal Entry Required" in the first account field.)

Answer 1

1
Dec 10,2018	Allowance for Doubtful Accounts	1700
	Accounts Receivable		1700
Dec 31,2018	Bad Debts expense	1900		=95000*2%
	Allowance for Doubtful Accounts		1900
2A
	Balance Sheet(Partial)
	At December 31,2018
	Current Assets
	Accounts Receivable	32300		=11000+95000-72000-1700
	Allowance for Doubtful Accounts	840		=640-1700+1900
	Accounts Receivable, net of allowance	31460
2B
	Income Statement(Partial)
	Year ending December 31,2018
	Operating expenses:
	Bad Debts expense	1900
3
	Yes, the rate seems to be reasonable.