Blunt Company makes credit sales of $25,000 during the month of February 2019. During 2019, collections are received on February sales of $24,500, accounts representing $500 of these sales are written off as uncollectible, and a $100 account previously written off is collected.

Required:

1.Prepare the journal entries necessary to record the preceding information if (a) bad debts are estimated as 3% of credit sales at the time of sale and (b) the bad debts are recorded as they actually occur.

2.Next Level Which methodrecording bad debts at the time of sale or when they actually occuris preferred? Why?

CHART OF ACCOUNTS

Blunt Company

General Ledger ASSETS 111 Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense

1a. Assume that bad debts are estimated as 3% of credit sales at the time of sale. Prepare the journal entries to record the credit sales for February and the related estimate of uncollectible accounts on February 28. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

1a. Assume that bad debts are estimated as 3% of credit sales at the time of sale. Prepare the journal entries to record the credit sales for February and the related estimate of uncollectible accounts on February 28. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

General Journal Instructions

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GENERAL JOURNAL

Score: 2/151

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Points:

0.4 / 30

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Check My Work

When a company estimates bad debts based on sales, the journal entry is a made before specific accounts are deemed uncollectible. This instruction tells you to record the entry for February credit sales on February 28. When a company determines that an individual amount is uncollectible, it writes off that amount, removing it from the customers account. Occasionally a company will receive payment from a customer for an amount that has already been written off. Most accountants favor reestablishing the amount owed and then recording the payment.

1b. Assume that the bad debts are recorded as they actually occur. Prepare the journal entry on February 28 to record the credit sales for February. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

General Journal Instructions

All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback.

PAGE 1

GENERAL JOURNAL

Score: 2/126

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