Recording and Determining the Effects of Write Offs, Recoveries, and Bad Debt Expense Estimates on the Balance Sheet and Income Statement

Academic Dishonesty Investigations Ltd. operates a plagiarism detection service for universities and community colleges.

Required:

1. Prepare journal entries for each transaction below.

a. On March 31, 10 customers were billed for detection services totaling $25,000.

b. On October 31, a customer balance of $1,500 from a prior year was determined to be uncollectible and was written off.

c. On December 15, a customer paid an old balance of $900, which had been written off in a prior year.

d. On December 31, $500 of bad debts were estimated and recorded for the year.

2. Complete the following table, indicating the amount and effect ( _ for increase, _ for decrease, and NE for no effect) of each transaction. Ignore income taxes.