The December 31, 2019 statement of financial position of Ocean Breezes Limited reported Accounts Receivable of $450,000 and the Allowance for Doubtful Accounts of $45,000. During 2020, the following transactions occurred:
1.service revenue billed on account, $1,500,000;
2.collections from customers, $1,300,000;
3.accounts written off $37,000;
4.previously written off accounts of $4,000 were collected (in addition to the “regular” collections).
REQUIRED
(a)Record the 2020 transactions.
(b)If the company uses the percentage of receivables basis to estimate bad debts expense and determines that uncollectible accounts are expected to be 5% of accounts receivable, prepare the adjusting entry for bad debts expense at December 31, 2020.
(c)What is the ending NRV for 2020?
(d)After more sales and collections in 2021, the estimated uncollectible accounts is estimated to be $25,000. Prepare the adjusting journal entry for the year.
Sample Solution
