Prepare journal entries to record the sales- and receivables-related trans­actions

Subject: Business    / Accounting
Question

Allowance method: Income statement and balance sheet
approaches.Tempe
Company reported accounts receivable of $300,000 and an allow­ance for
uncollectible accounts of $31,000 (credit) on the December 31, 19X2, balance
sheet. The following data pertain to 19X3 activities and operations:

Sales
on account

$2,000,000

Cash
collections from credit customers

1,600,000

Sales
discounts

50,000

Sales
returns & allowances

100,000

Uncollectible
accounts written off

29,000

Collections
on accounts that were previously written off

2,700

Instructions

Prepare journal entries to record the sales- and receivables-related trans­actions from 19X3.
Prepare the December 31,
19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles
are estimated to be 2% of net credit sales.
Prepare the December 31,
19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles
are estimated at 1% of year-end accounts receivable.
Compute the amount of the
adjusting entry in part (c) assuming that $46,000, rather than $29,000, of
accounts were written off in 19X3.