The following information pertains to Royal Carpet Company's sales on account and accounts receivable:

Accounts receivable balance, January 1,2008 $64,500
Allowance for doubtful accounts, January 1,2008 $2,800
Sales on account, 2008 $756,000
Cost on goods sold, 2008 $505,000
Collections of accounts receivable,2008 $782,000

After several collection attempts, Royal Carpet Company wrote off $2,600 of accounts that could not be collected. Royal estimates that bed debts expense will be 0.5 percent of sales on account.

Required :

1. Prepare the general journal entries to:

a. Record sales on account for 2008.
b. Record cash collections from accounts receivable
for 2008.
c. prepare off the accounts that are not collectible.
d. Record the estimated bad debts expense for 2008.

2. Compute the following amounts :

a. Using the allowance method, the amount of bad debts
expense for 2008.
b. Net realizable value of receivables at the end of 2008

3. describe why the bad debts expense amount is different
from the amount that was written off as uncollectible.