Response to the following problem:
The following balances appear in the unadjusted trial balance of Lapointe Inc. at its year-end, December 31, 2015.
Account Balances Debit Credit
Accounts Receivable $100,000
Allowance for Uncollectible Accounts $ 5,000
Sales ( all on credit) $600,000
Lapointe uses the balance sheet method of calculating its allowance for doubtful accounts account. At December 31, 2015, it estimates that three per cent of accounts receivable would not be collected. Lapointe had the following transactions during 2016:
a. Accounts receivable worth $9,000 were written off.
b. Credit sales amounted to $800,000.
c. Collections of accounts receivable amounted to $700,000.
d. Lapointe collected $2,000 in 2016 that was previously written off in 2015. This amount is not included in the collection of accounts receivable described in c.
e. At year-end, Lapointe estimated that the amount of doubtful accounts at December 31, 2016 was $10,000.
Required:
1. Prepare all journal entries required for 2015 and 2016.
2. If Lapointe had used the income statement method of estimating uncollectible accounts, calculate the balance in the Allowance for Doubtful Accounts general ledger account at December 31, 2015 and 2016. Assume that Lapointe estimated doubtful accounts to be one per cent of sales for both years.