At year-end (December 31), Chan Company estimates its bad debts as 0.50% of its annual credit sales of $823,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $412 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.

Question

Annalise Ferrell

Business

13 August, 07:47

At year-end (December 31), Chan Company estimates its bad debts as 0.50% of its annual credit sales of $823,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $412 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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Yoselin Murillo · Answer 1

The journal entries are as follows

On December 31

Bad debt expense Dr $4,115 ($823,000 * 0.50%)

To Allowance for doubtful debts $4,115

(Being the bad debt expense is recorded)

On Feb 01

Allowance for doubtful debts Dr $412

To Account receivable $412

(Being the uncollectible amount is recorded)

On June 5

Account receivable $412

To Allowance for doubtful debts Dr $412

(Being the uncollectible amount is recorded)

On June 5

Cash Dr $412

To Account receivable $412

(Being the cash received is recorded)