At year-end (December 31), The Company estimates its bad debts as 0.50% of its annual credit sales of $616,000. The Company records its Bad Debts Expense for that estimate. On the following February 1, The Company decides that the $308 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.

Required:

a. Prepare the journal entries for these transactions. 1. Record the estimated bad debts expense. 2. Record the entry to write off P. Park's account as uncollectible. 3. Record the reinstatement of Park's previously written off account. 4. Record the cash received on account.

Question

Potter

Business

3 June, 05:08

At year-end (December 31), The Company estimates its bad debts as 0.50% of its annual credit sales of $616,000. The Company records its Bad Debts Expense for that estimate. On the following February 1, The Company decides that the $308 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.

Required:

a. Prepare the journal entries for these transactions. 1. Record the estimated bad debts expense. 2. Record the entry to write off P. Park's account as uncollectible. 3. Record the reinstatement of Park's previously written off account. 4. Record the cash received on account.

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Answers (1)

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Kayla Vargas · Answer 1

The journal entries are as follows

On December 31

Bad debt expense Dr $3,080 ($616,000 * 0.50%)

To Allowance for doubtful debts $3,080

(Being the estimated bad debt expense is recorded)

On Feb 01

Allowance for doubtful debts Dr $308

To Account receivable $308

(Being the written off amount is recorded)

On June 5

Account receivable $308

To Allowance for doubtful debts Dr $308

(Being the uncollected amount is recorded)

On June 5

Cash Dr $308

To Account receivable $308

(Being the cash received on account is recorded)