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 $160,000, of which $80,000 was on credit. At the start of 2015, Accounts Receivable showed a $10,000 debit balance and the Allowance for Doubtful Accounts showed a $580 credit balance. Collections of accounts receivable during 2015 amounted to $66,000. Data during 2015 follow On December 10, a customer balance of $1,400 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 select "No (If no entry is required for a Journal Entry Required" in the first account field.) Journal entry worksheet the write-olf of not collectible botaling $1,400 a certain customer account froma 2 Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet and income statement for 2015 Income Statement (partial

Explanation / Answer

Solution: 1. Date General Journal Debit Credit a. Dec. 10, 2015 Allowance for Doubtful Accounts 1400 Accounts Receivable 1400 b. Dec. 31, 2015 Bad Debt Expense 1600 Allowance for Doubtful Accounts 1600 Notes: Bad Debt Expense=2% x credit sales =2% x 80,000 = 1600 2. a. Kelly’s Camera Shop Balance Sheet (partial) At December 31, 2015 Current Assets: Accounts Receivable 22,600 Allowance for Doubtful Accounts -780 21,820 Notes: Accounts Receivable balance on 31 December Beginning balance 10,000 Add: Credit sales during the period 80,000 Less: Collection during the period 66,000 less: Allowance for Doubtful Accounts 1,400 Ending balance 22,600 Allowance for Doubtful Accounts Beginning balance 580 Add: Allowance made 1,600 Less: Bad debt recorded 1,400 Ending balance 780 b. Kelly’s Camera Shop Income Statement (partial) Year ending December 31, 2015 Operating Expenses: Bad debt expense 1600 Please feel free to ask if anything about above solution in comment section of the question.

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