The accounts receivable balance for Diva Spa at December 31, 2012, was $56,000. Also on that date, the balance in the Allowance for Doubtful Accounts was $2,450. During 2013, $1,900 of accounts receivable were written off as uncollectible. In addition, Diva unexpectedly collected $600 of receivables that had been written off in a previous accounting period. Services provided on account during 2013 were $212,000, and cash collections from receivables were $214,000. Uncollectible accounts expense was estimated to be 2 percent of the sales on account for the period.
Required:
a. Record the transactions in general journal form and post to T-accounts. b. Based on the preceding information, compute (after year-end adjustment):
(1) Balance of Allowance for Doubtful Accounts at December 31, 2013.
(2) Balance of Accounts Receivable at December 31, 2013.
(3) Net realizable value of Accounts Receivable at December 31, 2013.
c. What amount of uncollectible accounts expense will Diva report for 2013?
d. Explain how the $600 recovery of receivables affects the income statement.