Reference no: EM132485241

The 2015 and 2016 sales and accounts receivable information for Velcary Company are shown below:

Point 1: At the beginning of 2015 AFDA account had a $0 balance.During 2015, sales for the year totalled 1,200,000 with 60% on credit. At December 31 year end, accounts receivable had a debit balance of $55,000 . Management estimated that 0.5% of accounts receivable would be uncollectible. The company wrote off $3,100 worth of accounts receivable at the end of the year.

Point 2: During 2016 total sales were 1,630,000 with 60% on credit. On December 31, 2016 accounts receivable has a debit balance of $76,000. During the year the company wrote-off certain receivables in the amount of $4,500. The estimate for the bad debts expense has not yet been determined. After reviewing the write-offs the company decided that the estimated percentage of AFDA should be increased from 0.50% to 0.75%.

Question a) Prepare T-Account for the allowance for doubtful accounts (AFDA) for 2015

Question b) Prepare the journal entry to record bad debts expense for 2015

Question c) Prepare T-Account for the allowance for doubtful accounts (AFDA) for 2016

Question d) Prepare the journal entry to record bad debts expense for 2016