Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2013, accounts receivable totaled $670,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $41,000 at the beginning of 2013 and $25,500 in receivables were written off during the year as uncollectible. Also, $2,100 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 15% to accounts receivable at the end of the year.

Prepare journal entries to record the write-off of receivables, the collection of $2,100 for previously written off receivables, and the year-end adjusting entry for bad debt expense.

Record the write-off of receivables.

Record the reinstatement of an account previously written off.

Record collection of account previously written off.

Record bad debt expense for the year.

Question

Jaime Delgado

Business

26 October, 16:45

Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2013, accounts receivable totaled $670,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $41,000 at the beginning of 2013 and $25,500 in receivables were written off during the year as uncollectible. Also, $2,100 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 15% to accounts receivable at the end of the year.

Prepare journal entries to record the write-off of receivables, the collection of $2,100 for previously written off receivables, and the year-end adjusting entry for bad debt expense.

Record the write-off of receivables.

Record the reinstatement of an account previously written off.

Record collection of account previously written off.

Record bad debt expense for the year.

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Answers (1)

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Rhianna Salinas · Answer 1

Journal entries

Explanation:

The journal entry are as follows

1. Allowance for doubtful debts $25,500

To Account receivable $25,500

(Being the written off amount is recorded)

2. Account receivable Dr $2,100

To Allowance for doubtful debts $2,100

(Being the reinstatement of an account previously written off is recorded)

3. Cash Dr $2,100

To Account receivable $2,100

(Being the collection of account is recorded)

4. Bad debt expense Dr $82,900

To Allowance for doubtful debts $82,900

(Being the bad debt expense is recorded)

It is computed below:

= $670,000 * 15% - ($41,000 + $25,500 + $2,100)

= $100,500 - $17,600

= $82,900

Only these entries are recorded