Inferring bad debt write-offs and reconstructing related journal entries
The 2012 annual report of Johnson Services reveals the following information. The dollar amounts are end-of-year balances.
|
2012 |
2011 |
|
|
Credit sale |
$75,300 |
$61,500 |
|
Accounts receivable |
9,400 |
9200 |
|
Allowance for doubtful accounts |
1300 |
1000 |
|
Bad debt recoveries |
55 |
70 |
Johnson estimates bad debts each year at 2 percent of credit sales.
a. Compute the actual amount of write-offs during 2012.
b. Infer the journal entries that explain the activity in accounts receivable and the related allowance account during 2012.