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Estimating and Recording Bad Debt Estimates and Write-Offs; Reporting of Accounts Receivable Mast...

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Accounting

Estimating and Recording Bad Debt Estimates and Write-Offs; Reporting of Accounts
Receivable
Mast Company's December 31 balances from the prior year related to accounts receivable
follow.
During the current year, $108,000 of accounts receivable is considered uncollectible, and
no more effort to collect these accounts will be made. Total sales for the current year are
$2,880,000, of which $480,000 are cash sales. A total of $2,160,000 cash was collected
during the current year from sales that were originally made on account.
Required
a. Assuming that Mast applies the allowance method to estimate net accounts receivable
and uses 9% of accounts receivable as its estimate of expected credit losses, prepare the
(1) journal entries to record write-offs and to record bad debt expense for the current year,
and (2) disclosure on gross and net accounts receivable on the balance sheet at December
31 of the current year.
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