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19 February, 21:19

Pincus Associates uses the allowance method to account for bad debts. During 2021, its first year of operations, Pincus provided a total of $126,000 of services on account. In 2021, the company wrote off uncollectible accounts of $5,100. By the end of 2021, cash collections on accounts receivable totaled $107,100. Pincus estimates that 10% of the accounts receivable balance at 12/31/2021 will prove uncollectible.

What journal entry did Pincus record to write off uncollectible accounts during 2021 and to recognize bad debt expense for 2021?

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  1. 19 February, 21:42
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    Journal entries

    Explanation:

    The journal entries are shown below:

    1. Allowance for doubtful accounts Dr $5,100

    To Accounts Receivable $5,100

    (Being the written off uncollected amount is recorded)

    2. Bad debts expense $18,900

    Allowance for Doubtful Accounts $18,900

    (Being the bad debt expense is recorded)

    The computation of is shown below:

    = Ending balance of account receivable * estimated percentage

    where,

    Ending balance is

    = Services on Account - Amount Written Off - Collection of accounts receivables

    = $126,000 - $5,100 - $107,100

    = $13,800

    Now the bad debt expense is

    = $13,800 + $5,100

    = $18,900
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