Blunt Company makes credit sales of $21,000 during the month of February 2019. During 2019, collections are received on February sales of $20,400, accounts representing $600 of these sales are written off as uncollectible, and a $100 account previously written off is collected. Required: 1. Prepare the journal entries necessary to record the preceding information if (a) bad debts are estimated as 3% of credit sales at the time of sale and (b) the bad debts are recorded as they actually occur. 2. Next Level Which method—recording bad debts at the time of sale or when they actually occur—is preferred? Why? 1a. Assume that bad debts are estimated as 3% of credit sales at the time of sale. Prepare the journal entries to record the credit sales for February and the related estimate of uncollectible accounts on February 28. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off. 1b. Assume that the bad debts are recorded as they actually occur. Prepare the journal entry on February 28 to record the credit sales for February. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter6: Cash And Receivables

Section: Chapter Questions

Problem 8E: Estimation versus Direct Write-Off of Bad Debts Blunt Company makes credit sales of 21,000 during...

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Blunt Company makes credit sales of $21,000 during the month of February 2019. During 2019, collections are received on February sales of $20,400, accounts representing $600 of these sales are written off as uncollectible, and a $100 account previously written off is collected.

	Required:
1.	Prepare the journal entries necessary to record the preceding information if (a) bad debts are estimated as 3% of credit sales at the time of sale and (b) the bad debts are recorded as they actually occur.
2.	Next Level Which method—recording bad debts at the time of sale or when they actually occur—is preferred? Why?

1a. Assume that bad debts are estimated as 3% of credit sales at the time of sale. Prepare the journal entries to record the credit sales for February and the related estimate of uncollectible accounts on February 28. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

1b. Assume that the bad debts are recorded as they actually occur. Prepare the journal entry on February 28 to record the credit sales for February. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

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