UNCOLLECTIBLE ACCOUNTS-PERCENTAGE OF SALES; COLLECTION OF ACCOUNT WRITTEN OFF
Chattanooga Fireworks Company (CFC) uses the percentage of sales method of accounting for uncollectible accounts. In the past, approximately 2% of all credit sales have been uncollectible. Credit sales for 20-6 amounted to $850,000. At the end of 20-6, Accounts Receivable had a debit balance of $120,000, and Allowance for Doubtful Accounts had a credit balance of $1,500. The following transactions occurred in 20-7:
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Mar.
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1
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Wrote off the account of J. Dullard for $380.
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May
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30
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Received a check from J. Dullard for $380.
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Required:
1. Enter the adjusting entry for bad debt expense at the end of 20-6.
2. Prepare journal entries for the transactions that occurred in 20-7.