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21 December, 00:57

Exercise 7-5 Percent of sales method; write-off LO P3 At year-end (December 31), Chan Company estimates its bad debts as 0.20% of its annual credit sales of $968,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $484 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. Prepare the journal entries for these transactions.

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  1. 21 December, 01:19
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    Dec 31 Dr Bad debts expense 1,936

    Cr Allowance for doubtful accounts 1,936

    Feb 01 Dr Allowance for doubtful accounts 484

    Cr Accounts receivable-P. Park 484

    Jun 05 Dr Accounts receivable-P. Park 484

    Cr Allowance for doubtful accounts 484

    Jun 05 Dr Cash 484

    Cr Accounts receivable-P. Park 484

    Explanation:

    General Journal Debit Credit

    Dec 31

    Dr Bad debts expense 1,936

    (0.002 * $968,000)

    Cr Allowance for doubtful accounts 1,936

    Feb 01

    Dr Allowance for doubtful accounts 484

    Cr Accounts receivable-P. Park 484

    Jun 05

    Dr Accounts receivable-P. Park 484

    Cr Allowance for doubtful accounts 484

    Jun 05

    Dr Cash 484

    Cr Accounts receivable-P. Park 484

    To record estimated bad debts expense (0.002 * $968,000) = $1,936
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