Question

Create a general journal using the following information. Blunt Company makes credit sales of $25,000 during the month of February 2019. During 2019, collections are received on February sales of $24,500, accounts representing $500 of these sales are written off as uncollectible, and a $100 account previously written off is collected. 1a. Assume that bad debts are estimated as 3% of credit sales at the time of sale. Prepare the journal entries to record the credit sales for February and the related estimate of uncollectible accounts on February 28. Next, record the collections on account, the amount that was written off, and the collection of the account that had been previously written off.

Blunt Company
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 331 Retained Earnings	REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense

2. Which method—recording bad debts at the time of sale or when they actually occur—is preferred?

Recording bad debts ______ is preferred because this approach enables companies to properly value their receivables and match expenses against revenues in the current period.

A. when they actually occur

B. at time of sale

Answer 1

Please comment for any explanation,

Thanks,