How the amounts related to accounts receivable and bad debt

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In one year, a company had $30,000 Sales Revenue on credit. At the start of the year, the Accounts Receivable showed a $6,000 debit balance and the Allowance for Doubtful Accounts showed a $400 credit balance. Collections of accounts receivable during the year amounted to $22,000. The following gives additional items during the year.

(a) On December 31, an Account Receivable of $450 from a prior year was determined to be uncollectable; therefore, it was written off immediately as a bad debt.
(b) On December 31, on the basis of experience, a decision was made to continue the accounting policy of basing estimated bad debt losses on 3 percent of credit sales for the year.

Give the journal entries for the items (a) and (b) at the end of the accounting period. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement and balance sheet for the year. Disregard income tax considerations.

 

Reference no: EM13492275

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