Question 1 (35 points)Brookline Company had the following account balances related to credit sales and receivables information at the end of 2005: (i) Customers owed the company $125,000 (gross); (ii) Allowance for Doubtful Accounts showed a credit balance of 11,000. During 2006, Brookline Company recorded credit sales of $1,050,000. In 2006, the company also received information that a customer owing $10,000 had gone bankrupt. This amount was written off. The accounts receivable balance (gross) at the end of 2006 was $275,000. Requireda. (5 points) How much cash did the company collect from customers during 2006? Amount of cash collected: $890Calculations125+1,050-Cash-10=275 Cash=890 b. (6 points) Prepare the journal entry for the amount of bad debt written off during 2006. Journal entry Allowance for Bad Debt 10,000 A/R 10,000 c. (4 points) What was the effect of the bad debt write-off on the company’s 1.Pretax Income for 2006? (circle one) Increase / Decrease / No change2.Total Net Assets at end of 2006? (circle one) Increase / Decrease / No changed. (8 points) Brookline Company estimates that 2% of its credit sales will prove to be uncollectible. Prepare the adjusting journal entry for bad debt expense for 2006. Journal entry Bad Debt Exp. 21,000 (2%*$1,050,000) Allow. DA 21,000
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