Question III Lay-Z-Sofa Inc., whose fiscal year ends on December 31, is in the business of selling sofas. In 2021, Lay-Z-Sofa Inc. engaged in the following transactions: 1. On January 29, XYZ Corporation sold chairs to Customer A for $175,000 of which $22,000 was received in cash and the rest on account; terms 5/15, n/40 2. On February 3, Customer A paid the account balance in full. 3. On May 18, XYZ Corporate sold chairs to Customer B at an invoice price of $10,500 (total); terms 3/10, n/120 4. On June 15, XYZ Corporation finds that Customer B went bankrupt. 5. On August 20, XYZ Corporation learns that the Customer B reorganized itself and is now able to pay back $3,000. 6. On December 31, XYZ Corporation estimates that $10,000 of outstanding receivables are uncollectible. Additional information: 1. The beginning balance of Allowance for Bad Debt for FY 2021 was $3,000. 2. Please ignore the cost of goods sold. Required: a. Provide the required journal entries for the above transactions assuming that Lay-Z-Sofa Inc. follows the allowance method. b. Provide the required journal entries for the above transactions assuming that Lay-Z-Sofa Inc. follows the specific write-off method.
