Chapter 9, Problem S9.6SE

Applying the allowance method (percent-of-sales) to account for uncollectibles

Learning Objective 3

During its first year of operations, Fall Wine Tour earned net credit sales of S31 1 ,OOO Industry experience suggests that bad debts will amount to 3% of net credit sales.. At December 31, 201 8, accounts receivable total $44,000. The company uses the allowance method to account for uncollectibles.

Requirements

1. Journalize Fall Wine Tour’s Bad Debts Expense using the percent-of-sales method.
2. Show how to report accounts receivable on the balance sheet at December 31, 201 8.