During the year ended december 31, 2018, kelly’s camera shop had sales revenue of $120,000, of which $60,000 was on credit. at the start of 2018, accounts receivable showed a $12,000 debit balance and the allowance for doubtful accounts showed a $500 credit balance. collections of accounts receivable during 2018 amounted to $58,000. data during 2018 follow:
(a) 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.

give the required journal entries for the two events in december.

Dr Sales Returns and Allowances$ 1,400  

Cr Accounts Receivable  $ 1,400

Dr Bad Debt Expense$ 752  

Cr Allowance for Uncollectible Accounts  $ 752

Explanation:

Initial Balance  

Dr Accounts Receivable  $ 12,000

Cr Allowance for Uncollectible Accounts  $ 500

Kelly’s Camera Shop had sales revenue, of which $60,000 was on credit  

Dr Accounts Receivable  $ 60,000  

Cr Sales  $ 60,000

Collections of accounts receivable during 2018 amounted to $58,000.  

Dr Cash$ 58,000  

Cr Accounts Receivable  $ 58,000

(a) On December 10, a customer balance of $1,400 from a prior year was

determined to be uncollectible, so it was written off.  

Dr Allowance for Uncollectible Accounts$ 1,400  

Cr Accounts Receivable  $ 1,400

(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.  

Dr Bad Debt Expense$ 752  

Cr Allowance for Uncollectible Accounts  $ 752

If the company applies the allowance method, it means that the account Allowance for Uncollectible Accounts must show as balance the % of accounts receivables as CREDIT.  

Because the company has a debit balance in that account it's necessary to register an entry that compensate the DEBIT value and reflect A CREDIT estimated as % of account receivable.  

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