During the year ended December 31, 2015, Kelly\'s Camera Shop had sales revenue

Question

During the year ended December 31, 2015, Kelly's Camera Shop had sales revenue of $205,000, of which $102,500 was on credit. At the start of 2015, Accounts Receivable showed a $11,000 debit balance and the Allowance for Doubtful Accounts showed a $670 credit balance. Collections of accounts receivable during 2015 amounted to $75,000. Data during 2015 follow a. On December 10, a customer balance of $1,850 from a prior year was determined to be uncollectible, so it was written off. b. On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year. Required: 1. Give the required journal entries for the two events in December. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Explanation / Answer

01.01.2015 Accounts Recievable Balance 11000 31.12.2015 Allowances for Doubtful Debt 0 Add: Credit Sales during the Year 102500 Less: Collections of 'ARs 75000 31.12.2015 Accounts Recievable Balance 38500 31.12.2016 Accounts Recievable Balance 2050 (2% of Credit Salesi.e. 102500) Add: Uncollectible During the year Journal Entry: 10.12.2015 Allowance for Doubtful Debt Account Dr. 670 Bad Debt Expense Account Dr. 1180 (Due to Insufficient Balance in Allowance Account) To Account Recievable Account 1850 (1850-670) (Being Uncollectible Recognised) 31.12.2015 Bad Debt Expense Account Dr. 2050 To Allowance for Doubtful Debt Account 2050 (Being Provisions Made) Kelly's Camera Shop Balance Sheet (Partial) At December 31, 2015 Current Assets: Accounts Recievable Balance 38500 Less: Allowance for Doubtful Debts -2050 Accounts Recievable Balance Net 36450 Kelly's Camera Shop Income Statement (Partial) Year Ending December 31, 2015 Operating Expense: Bad Debt Expense 3230 (1180+2050)

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