OPA provided for uncollectible accounts receivable under the allowance method. Provisions were made monthly at 1% of credit sales, bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustment to the allowance account has yet been made.
The balance in Allowance for Doubtful Accounts was a credit of $50,000 at January 1, 2014. During 2014, credit sales totalled $1,200,000, interim provisions for doubtful accounts were made at 1% of credit sale, $140,000 of bad debts were written off, and recoveries of accounts previously written off amount to $5,000. At December 31, 2014, OPA estimates that 5% of the $200,000 balance in Accounts Receivable is uncollectible.
Prior to adjusting entries on 12/31/2014, what is the balance in Allowance for Doubtful Accounts? Show details of your work in the T-account.
Prepare the necessary adjusting entry at 12/31/2014.
What amounts related to Accounts Receivable should OPA report on its December 31, 2014 balance sheet?