Starseekers,Inc

Essay

Starseekers,Inc.began the year with a $4,800 normal balance in Accounts Receivable and a credit balance in its Allowance for Doubtful Accounts of $546.Starseekers' sales were all on account and amounted to $41,800 during the year.Collections from customers amounted to $40,600 and the company wrote-off customer account balances totaling $500 during the year.
Required:
Part a.Using T-accounts,determine how much Starseekers' customers owe the company at year-end and the unadjusted balance in its Allowance for Doubtful Accounts account.
Part b.The company currently uses the percentage of credit sales method for determining its Bad Debt Expense.Historically,bad debts have approximated 3% of credit sales.Prepare the related adjusting entry and,using a T-account,determine the ending balance in the Allowance for Doubtful Accounts account.
Part c.Assume instead that the company uses the aging of accounts receivable method.This method resulted in an estimate of uncollectible accounts of $1,105.Prepare the related adjusting entry and,using a T-account,determine the ending balance in the Allowance for Doubtful Accounts account.