Problem:
A company that uses the percent of sales to account for its bad debts had credit sales of $740,000 in 2007, including a $720 sale to Helen Sweet. On December 31, 2007, the company estimated its bad debts at 1.5% of its credit sales. On June 1, 2008, the company wrote off, as uncollectible, the $720 account of Helen Sweet. On December 21, 2008, Helen Sweet unexpected paid her account in full. Prepare the necessary journal entries:
a) on December 31, 2007 to reflect the estimate of bad expense;
b) on June 1, 2008, to write off the bad debt; and
c) on December 21, 2008, to record the unexpected collection.