Allowance method: estimation and balance sheet disclosure. The following pre-adjusted information for the Maverick Company is available on December 31:
• Accounts receivable $107,000
• Allowance for uncollectible accounts 5,400 (credit balance)
• Credit sales 250,000
a. Prepare the journal entries necessary to record Maverick’s uncollectible accounts expense under each of the following assumptions:
(1) Uncollectible accounts are estimated to be 5% of Credit Sales.
(2) Uncollectible accounts are estimated to be 14% of Accounts Receivable.
b. How would Maverick’s Accounts Receivable appear on the December 31 balance sheet under assumption (1) of part (a)?
c. How would Maverick’s Accounts Receivable appear on the December 31 balance sheet under assumption (2) of part (a)?