Chapter 6, Problem 6.8E

Recording Bad Debt Expense Estimates and Write-Offs Using the Percentage of Credit Sales Method

During the current year, Sun Electronics, Incorporated, recorded credit sales of $5,000,000. Based on prior experience, it estimates a 2 percent had debt rate on credit sales.

Required:

Prepare journal entries for each transaction:

1. a. On November 13 of the current year, an account receivable for $98,000 from a prior year was determined to be uncollectible and was written off.
2. b. At year-end, the appropriate bad debt expense adjustment was recorded for the current year.