During the year ended December 31, 2021, Kelly's Camera Shop had sales revenue of $120,000, of which $60,000 was on credit. At the start of 2021, Accounts Receivable showed a $12,000 debit balance and the Allowance for Doubtful Accounts showed a $500 credit balance. Collections of accounts receivable during 2021 amounted to $58,000. Data during 2021 follow: a. On December 10, a customer balance of $1,000 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-a. Show how the amounts related to Bad Debt Expense would be reported on the income statement. 2-b. Show how the amounts related to Accounts Receivable would be reported on the balance sheet. 3. On the basis of the data available, does the 2 percent rate appear to be reasonable?

During the year ended December 31, 2021, Kelly's Camera Shop had sales revenue of $120,000, of which $60,000 was on credit. At the start of 2021, Accounts Receivable showed a $12,000 debit balance and the Allowance for Doubtful Accounts showed a $500 credit balance. Collections of accounts receivable during 2021 amounted to $58,000. Data during 2021 follow: a. On December 10, a customer balance of $1,000 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-a. Show how the amounts related to Bad Debt Expense would be reported on the income statement. 2-b. Show how the amounts related to Accounts Receivable would be reported on the balance sheet. 3. On the basis of the data available, does the 2 percent rate appear to be reasonable?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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