Determining Bad Debts and Reporting Accounts Receivable
The bookkeeper of Vital Inc. has asked you to assist him with the preparation of information about the company's accounts receivable for presentation in the statement of financial posit at December 31, 2018, the end of the company's fiscal year. The following details have been extracted from the company's files:  Sales for 2018 totalled $1,300,000; $300,000 were in cash and the rest on account. The company collected $1,100,000 from credit customers during 2018 and wrote off $30,000 of accounts receivabl as uncollectible.
Required:
1. Determine the balance of accounts receivable at December 31, 2018.
2. Vital estimates that 6 percent of the ending balance of its accounts receivable may not be collect in the future. Prepare the journal entries to record the write-off of accounts receivable and the debt expense for 2018.
3. Show how the information related to accounts receivable is presented on the company's state of financial position as at December 31, 2018
4. After you finished helping the bookkeeper with the journal entries and the statement of final position presentation, he said, “These calculations seem to be complicated. Would it not be simpler to treat the $30,000 as bad debt expense when the company is certain that the custom are not able to pay the amount owed? That way, you record the exact amount of bad debt w it happens, and you do not have to estimate an amount of doubtful accounts and risk being incorrect.” Prepare a response to the bookkeeper.