Question: 1. Irwin purchases $7,000 of merchandise from Stamford on December 16, 2011. Stamford accepts Irwin's $7,000, 90-day, 12% note as payment. Stamford's accounting period ends on December 31, and it does not make reversing entries. Prepare entries for Stamford on December 16, 2011, and December 31, 2011.
2. Using the information in Quick Check 8, prepare Stamford's March 16, 2012, entry if Irwin dishonors the note.
3. Why is estimated bad debts expense credited to a contra account (Allowance for Doubtful Accounts) rather than to the Accounts Receivable account?