Evaluate collectibility using the allowance for uncollectible accounts
Response to the following problem:
During its first year of operations, Nunley Chocolates, LTD., Inc., had sales of $483,000, all on account. Industry experience suggests that Nunley Chocolates, LTD.'s uncollectibles will amount to 2% of credit sales. At December 31, 2014, accounts receivable total $49,000. The company uses the allowance method to account for uncollectibles.
1. Make Nunley Chocolates, LTD.'s journal entry for uncollectible-account expense using the percent-of-sales method.
2. Show how Nunley Chocolates, LTD. should report accounts receivable on its balance sheet at December 31, 2014.