During the year ended December 31, 2021, Kelly's Camera Shop had sales revenue of $170,000, of which $85,000 was on credit. At the start of 2021, Accounts Receivable showed a $10,000 debit balance and the Allowance for Doubtful Accounts showed a $600 credit balance. Collections of accounts receivable during 2021 amounted to $68,000. Data during 2021 follow: a. On December 10, a customer balance of $1,500 from a prior year was determined to be uncollectible, so it was written off. b. 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: 1. Give the required journal entries for the two events in December. 2-a. Show how the amounts related to Bad Debt Expense would be reported on the income statement. 2-b. Show how the amounts related to Accounts Receivable would be reported on the balance sheet. 3. On the basis of the data available, does the 2 percent rate appear to be reasonable?
During the year ended December 31, 2021, Kelly's Camera Shop had sales revenue of $170,000, of which $85,000 was on credit. At the start of 2021, Accounts Receivable showed a $10,000 debit balance and the Allowance for Doubtful Accounts showed a $600 credit balance. Collections of accounts receivable during 2021 amounted to $68,000. Data during 2021 follow: a. On December 10, a customer balance of $1,500 from a prior year was determined to be uncollectible, so it was written off. b. 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: 1. Give the required journal entries for the two events in December. 2-a. Show how the amounts related to Bad Debt Expense would be reported on the income statement. 2-b. Show how the amounts related to Accounts Receivable would be reported on the balance sheet. 3. On the basis of the data available, does the 2 percent rate appear to be reasonable?
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:During the year ended December 31, 2021, Kelly's Camera Shop had sales revenue of $170,000, of which $85,000 was on credit. At
the start of 2021, Accounts Receivable showed a $10,000 debit balance and the Allowance for Doubtful Accounts showed a $600
credit balance. Collections of accounts receivable during 2021 amounted to $68,000.
Data during 2021 follow:
a. On December 10, a customer balance of $1,500 from a prior year was determined to be uncollectible, so it was written off.
b. 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:
1. Give the required journal entries for the two events in December.
2-a. Show how the amounts related to Bad Debt Expense would be reported on the income statement.
2-b. Show how the amounts related to Accounts Receivable would be reported on the balance sheet.
3. On the basis of the data available, does the 2 percent rate appear to be reasonable?
Complete this question by entering your answers in the tabs below.
Req 1
Req 2A
Req 2B
Req 3
Give the required journal entries for the two events in December. (If no entry is required for a transaction/event, select "No Journal Entry
Required" in the first account field.)
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