Reference no: EM133146947

Question - During year ended Dec. 31, 2021, camera shop had sales revenue of $190,000, of which $95,000 was on credit. At the start of 2021, accounts receivable showed a $11,000 debit balance and the allowance for doubtful accounts showed a $640 credit balance. Collections of accounts receivable during 2021 amounted to $72,000.

Data during 2021:

a. On Dec 10 a customer balance of $1,700 from a prior year was determined to be uncollectable and was written off

b. On Dec 31 a decision was made to continue the accounting policy basing estimated bad debt losses on 2 percent of credit sales for the year.

Required -

A. Show how the amounts related to bad debt expense would be reported on the income statement.

B. Show how the amounts related to Accounts Receivable would the reported on the balance sheet (partial).

C. On the basis of the data available, Does the 2% rate appear reasonable?