The ledger of Montgomery Company at the end of the current year shows Accounts Receivable $78,000; Credit Sales $810,000; and Sales Returns and Allowances $40,000.
Instructions
(a) If Montgomery uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Montgomery determines that Baruth”s $900 balance is uncollectible.
(b) If Allowance for Doubtful Accounts has a credit balance of $1,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 10% of accounts receivable.
(c) If Allowance for Doubtful Accounts has a debit balance of $500 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 8% of accounts receivable.