During the year ended December 31, 2018, Kelly’s Camera Shop had sales revenue of $170,000, of which $85,000 was on credit. At the start of 2018, Accounts Receivable showed a $10,000 debit balance and the Allowance for Doubtful Accounts showed a $600 credit balance. Collections of accounts receivable during 2018 amounted to $68,000. Data during 2018 follow:On December 10, a customer balance of $1,500 from a prior year was determined to be uncollectible, so it was written off.On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year. Required:Give the required journal entries for the two events in December.Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2018.On the basis of the data available, does the 2 percent rate appear to be reasonable?

Ending Allowance for Doubtful Accounts = Beginning Allowance for Doubtful Accounts + Bad debts…

Answered: During the year ended December 31,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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During the year ended December 31, 2018, Kelly’s Camera Shop had sales revenue of $170,000, of which $85,000 was on credit. At the start of 2018, Accounts Receivable showed a $10,000 debit balance and the Allowance for Doubtful Accounts showed a $600 credit balance. Collections of accounts receivable during 2018 amounted to $68,000.

Data during 2018 follow:

On December 10, a customer balance of $1,500 from a prior year was determined to be uncollectible, so it was written off.
On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.

Required:

Give the required journal entries for the two events in December.
Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2018.
On the basis of the data available, does the 2 percent rate appear to be reasonable?

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