option #2

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)

Assignment Template

During the year 2014, credit sales were $260,000 and collections on accounts were $220,000. The following transactions occurred during 2014:

1. January 11, 2014: Wrote off Mora’s account, $1,200.
2. August 30, 2014: Wrote off MyLine’s account, $250.
3. November 20, 2014: Sophy pays $600 of her $1,600 account receivables due.
4. December 1, 2014: Received $3,000 payment on Smith’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.

Instructions:

Submit the following items in an Excel spreadsheet, labeling each as 1, 2, 3, and 4:

1. The four journal entries (1 to 4 above) with a one-sentence description
2. The allowance for doubtful accounts T-account
3. The journal entry to record bad debt expense
4. The balance sheet presentation of net realizable value, including gross accounts receivables of $42,000