The Income Statement Approach to Estimating Uncollectible Accounts Expense Is

Essay

The income statement approach to estimating uncollectible accounts expense is used by Kerley Company. On February 28 the firm had accounts receivable in the amount of $437000 and Allowance for Doubtful Accounts had a credit balance of $2140 before adjustment. Net credit sales for February amounted to $3000000. The credit manager estimated that uncollectible accounts expense would amount to 1% of net credit sales made during February. On March 10 an accounts receivable from Kathy Black for $6100 was determined to be uncollectible and written off. However on March 31 Black received an inheritance and immediately paid her past due account in full.
Instructions
(a) Prepare the journal entries made by Kerley Company on the following dates:
1. February 28
2. March 10
3. March 31
(b) Assume no other transactions occurred that affected the allowance account during March. Determine the balance of Allowance for Doubtful Accounts at March 31.