The Connecting Company Uses the Percent of Sales Method of Accounting

question 153

Essay

The Connecting Company uses the percent of sales method of accounting for uncollectible accounts receivable. During the current year, the following transactions occurred:
$\begin{array}{|l|l|}\hline \text { Sept. 7 } & \begin{array}{l}\text { Connecting Company determined that the } \$ 8,100 \text { account receivable of the Helena } \\\text { Company was uncollectible and wrote it off. }\end{array} \\\hline \text { Oct. 15 } & \begin{array}{l}\text { Connecting Company determined that the } \$ 2,500 \text { account receivable of the Tree } \\\text { Company was uncollectible and wrote it off. }\end{array} \\\hline \text { Nov. 9 } & \begin{array}{l}\text { Helena Company paid } \$ 6,000 \text { of the amount owed to the Connecting Company. } \\\text { Connecting Company does not expect further collections from the Helena } \\\text { Company. }\end{array} \\\hline \text { Dec. 31 } & \begin{array}{l}\text { Connecting Company estimates that } 0.5 \% \text { of its } \$ 1,900,000 \text { of credit sales would be } \\\text { uncollectible. }\end{array} \\\hline\end{array}$ 1. Prepare the general journal entries to record these transactions.
If the balance of the allowance for uncollectible accounts was an $8,000 credit on January 1 of the current year, determine the balance of the allowance for doubtful accounts at December 31 of the current year. Assume that the transactions above are the only transactions affecting the allowance for doubtful accounts during the year.

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