Reference no: EM13869867

Account Receivable Entries

The following financial information pertains to Sleepy Company:

Accounts receivable, 12/31/09	$275,000
Allowance for bad debts, 12/31/09	8,400
Net credit sales, 2010	1,980,000
Collections on credit sales during 2010	1,730,000
Accounts receivable written off in 2010	6,500

Required

a. Prepare all the necessary journal entries for 2010 sales, collections, and write-offs (using the direct write-off method).

b. Prepare 2010 journal entries to record write-offs and to estimate bad debt expense assuming bad debt expense is estimated on a (i) percentage of net credit sales basis (2%) and (ii) percentage of accounts receivable basis (5%).

c. What is the net realizable value of accounts receivable in parts b(i) and b(ii)?

d. Explain the rationale for each of the methods in part b.