Pate Bros. uses the allowance method to account for uncollectible accounts expense. Pate experienced the following four events in 2013:
1. Recognized $68,000 of revenue on account.
2. Collected $62,000 cash from accounts receivable.
3. Determined that $500 of accounts receivable were not collectible and wrote them off.
4. Recognized uncollectible accounts expense for the year. Pate estimates that uncollectible accounts expense will be 2 percent of its sales.
Required:
a. Show the effect of each of these events on the elements of the financial statements, using a horizontal statements model like the following one. Use + for increase, Use - for decrease, and NA for not affected. In the cash flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA).
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b. Record the above transactions in general journal form.