Gomez Corp. uses the allowance method to account for uncollectibles. On January 31, it wrote off an $1,500 account of a customer, C. Green. On March 9, it receives a $1,000 payment from Green. 1. Prepare the journal entry for January 31 2. Prepare the journal entries for March 9; assume no additional money is expected from Green.

Question

Valeria Lloyd

Business

14 April, 19:46

Gomez Corp. uses the allowance method to account for uncollectibles. On January 31, it wrote off an $1,500 account of a customer, C. Green. On March 9, it receives a $1,000 payment from Green. 1. Prepare the journal entry for January 31 2. Prepare the journal entries for March 9; assume no additional money is expected from Green.

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Karlie Perkins · Answer 1

Debit Credit

1) Allowance for doubtful accounts $1,500

Accouts receivable $1,500

2) Cash $1,000

Bad debt recovery account $1,000

Explanation:

1) Since the company adopts the allowance method to account for uncollectibles, it is expected that there would still be some buffer in that account to take care of the write-off. So, that account has to be debited to extinguish the accounts receivables.

2) Now that there is a recovery from Green, cash has to be debited, first of all to recognize the receipt and then credit goes to bad debt recovery account, which reports to income statement.