A Company That Uses the Allowance Method to Account for Its

Essay

A company that uses the allowance method to account for its bad debts had credit sales of $740,000 in 2010,including a $720 sale to Linda Paul.On December 31,2010,the company estimated its bad debts at 1.5% of its credit sales.On June 1,2011,the company wrote off as uncollectible the $720 account of Linda Paul; and on December 21,2008 Linda Paul unexpectedly paid her account in full.Prepare the necessary journal entries (a)on December 31,2010,to reflect the estimate of bad debts expense; (b)on June 1,2011,to write off the bad debt; and (c)on December 21,2011,to record the unexpected collection.