The Links Company Uses the Percent of Sales Method of Accounting

question 6

Essay

The Links Company uses the percent of sales method of accounting for uncollectible accounts receivable.During the current year,the following transactions occurred:
1.Prepare the general journal entries to record these transactions.
2.If the balance of the allowance for uncollectible accounts was a $4,000 credit on January 1 of the current year,determine the balance of the allowance for uncollectible accounts at December 31 of the current year.Assume that the transactions above are the only transactions affecting the allowance for uncollectible accounts during the year.

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Definitions:

Market

Any place where buyers and sellers exchange goods and services.

Barriers Blocking Entry

Impediments and restrictions that make it difficult for new firms to enter a market, often ensuring existing companies retain their market share.

Perfect Competitor

A theoretical market situation where numerous small firms compete against each other with no single company controlling the market price.

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from total revenues, indicating the total financial gain.