Task: Prepare entries to record the following transactions using the allowance method for uncollectible accounts.
1) The firm assumes that approximately 1% of total sales on account will prove uncollectible. Sales for Year 1 are $1,000,000. All sales are on account.
2) On July 7, Year 2, it is determined that an account of $2,000 will not be collected.
3) On August 14, Year 2, it is determined that an account of $3,000 will not be collected.
4) On December 31, Year 2, the company estimates that 2% of total credit sales of $2,000,000 will be uncollectible.
5) On February 1, Year 3, it is determined that accounts of $6,000 will not be collected.
6) On March 2, Year 3, $1,000 is collected on an account that had previously been written off as uncollectible in (e).
It is determined that the account was originally written off in error.