Question: Uncollectible accounts-percentage of sales and percentage of receivables. At the completion of the current fiscal year ending December 31, the balance of Accounts Receivable for Yang's Gift Shop was $30,000. Credit sales for the year were $355,200.
Required: Make the necessary adjusting entry in general journal form under each of the following assumptions. Show calculations for the amount of each adjustment and the resulting net realizable value.
1. Allowance for Doubtful Accounts has a credit balance of $330.
(a) The percentage of sales method is used and bad debt expense is estimated to be 2% of credit sales.
(b) The percentage of receivables method is used and an analysis of the accounts produces an estimate of $6,950 in uncollectible accounts.
2. Allowance for Doubtful Accounts has a debit balance of $400.
(a) The percentage of sales method is used and bad debt expense is estimated to be 1.5% of credit sales.
(b) The percentage of receivables method is used and an analysis of the accounts produces an estimate of $5,685 in uncollectible accounts.