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Option #2: Percentage of Sales Method: The Miko Company Case
On January 1, 2014, the Miko Company had the following accounts on its books:
Accounts Receivable: $120,000 (debit)
Allowance for Uncollectable Accounts: $4,200 (credit)
During the year 2014, credit sales were $260,000 and collections on accounts were $220,000. The following transactions occurred during 2014:
- January 11, 2014: Wrote off Moraâ€™s account, $1,200.
- August 30, 2014: Wrote off MyLineâ€™s account, $250.
- November 20, 2014: Sophy pays $600 of her $1,600 account receivables due.
- December 1, 2014: Received $3,000 payment on Smithâ€™s accounts receivable, which was previously written off and needs to be restated.
December 31, 2014: In an adjusting entry, Miko Company recorded the provision for uncollectable accounts at 1.5% of credit sales for the year.
Submit the following items in an Excel spreadsheet, labeling each as 1, 2, 3, and 4:
- The four journal entries (1 to 4 above) with a one-sentence description
- The allowance for doubtful accounts T-account
- The journal entry to record bad debt expense
- The balance sheet presentation of net realizable value, including gross accounts receivables of $42,000