The accounts receivable balance for Renue Spa at December 31, 2015, was $61,000. Also on that date, the balance in the Allowance for Doubtful Accounts was $3,750. During 2016, $2,100 of accounts receivable were written off as uncollectible. In addition, Renue unexpectedly collected $500 of receivables that had been written off in a previous accounting period. Services provided on account during 2016 were $215,000, and cash collections from receivables were $218,000. Uncollectible accounts expense was estimated to be 2 percent of the sales on account for the period.
a. Record the transactions in general journal form and post to T-accounts.
b. Based on the preceding information, compute (after year-end adjustment):
(1) Balance of Allowance for Doubtful Accounts at December 31, 2016.
(2) Balance of Accounts Receivable at December 31, 2016.
(3) Net realizable value of Accounts Receivable at December 31, 2016.
c. What amount of uncollectible accounts expense will Revenue report for 2016?
d. Explain how the $500 recovery of receivables affects the income statement.