Ultra Leather Products sells leather clothing at both wholesale and retail. The company has found

Question

that there is a higher rate of uncollectible accounts from retail credit sales than from wholesale
credit sales. Ultra computes its estimated loss from uncollectible accounts at the end of each year.
The amount is based on the rates of loss that the firm has developed from experience for each division.
A separate computation is made for each of the two types of sales. The firm uses the percentage
of net credit sales method.
As of December 31, 2013, Accounts Receivable has a balance of $392,000, and Allowance for
Doubtful Accounts has a debit balance of $326.80. The following table provides a breakdown of
the credit sales for the year 2013 and the estimated rates of loss:
Category Amount Estimated Rate of Loss
Wholesale $2,040,000 0.5%
Retail 548,600 1.2%
INSTRUCTIONS
1. Compute the estimated amount of uncollectible accounts expense for each of the two
categories of net credit sales for the year.
2. Prepare an adjusting entry in general journal form to provide for the estimated uncollectible
accounts on December 31, 2013. Use Uncollectible Accounts Expense.
3. Show how Accounts Receivable and Allowance for Doubtful Accounts should appear on the
balance sheet of Ultra Leather Products as of December 31, 2013.
4. On January 20, 2014, the account receivable of Delphi Clothiers, amounting to $830, is
determined to be uncollectible and is to be written off. Record this transaction in the general
journal.
5. On November 26, 2014, the attorneys for Ultra turned over a check for $830 that they obtained
from Delphi Clothiers in settlement of its account, which had been written off on January 20.
The money has already been recorded in the cash receipts journal. Give the general journal
entry to reverse the original write-off.