Accounting for uncollectibles over two periods
Glacier Ice Company uses a percentage-of-net-sales method to account for estimated bad debts. Historically, 3 percent of net sales have proven to be uncollectible. During 2011 and 2012, the company reported the following:
a. Prepare the necessary adjusting entry on December 31, 2011, to record the estimated bad debt expense for 2011.
b. Assume that the January 1, 2011 balance in allowance for doubtful accounts was $65,000 (credit) and that $70,000 in bad debts were written off the books during 2011. What is the December 31, 2011, balance in this account after adjustments?
c. Prepare the necessary adjusting entry on December 31, 2012, to record the estimated bad debt expense for 2012.
d. What is the December 31, 2012, balance in allowance for doubtful accounts? Assume that $85,000 in bad debts was written off the books during 2012.