Majestic Equipment Sales Company which sells only on

account had #217

Majestic Equipment Sales Company, which sells only on account, had a $120,000 balance in its
accounts receivable and a $4,200 balance in its allowance for doubtful accounts on December
31, 2011. During 2012, the company's sales of equipment were $820,000, and its total cash
collections from customers were $780,000.During the year, the company concluded that
customers with accounts totalling $6,000 would be unable to pay, and wrote these receivables
off. However, one of these customers subsequently made a payment of $850. At the end of
2012, management decided that it would use an estimate for bad debts of 1% of its credit
sales.Required:a. Prepare the journal entries to record all the 2012 transactions, including the
adjustment for bad debts expense at year end.b. Show how the accounts receivable section of
the balance sheet at December 31, 2012, would be presented.c. What amount of bad debts
expense would appear in the statement of earnings for the year ended December 31,
2012?View Solution:
Majestic Equipment Sales Company which sells only on account had

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