Question

The gadzooks Chip Company offers credit terms to its customers. At the end of 2013, accounts receivable totaled $2, 23,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $68,000 at the beginning of 2013 and $46, 200 in receivables was written off during the year as uncollectible. No previously written off receivables were collected. The company estimates bad debts by allying a percentage of 3% to accounts receivable at the end of the year. Prepare journal entries to record the write-off of receivables. Prepare journal entries to record the year-end adjusting entry for bad debt expense. Show your computation. How would accounts receivable be shown in the 2013 year-end balance sheet? The company made $3, 500,000 net credit sales during the year. If the company had used income statement approach to charge 1% of net credit sales to bad debt expense, how would it be recorded in journal entry? Would it have increased or decreased the amount set aside as allowance for uncollectible accounts?