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4 October, 18:30

Exercise 9-6 Percent of sales method; write-off LO P3 At year-end (December 31), Chan Company estimates its bad debts as 1% of its annual credit sales of $487,500. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $580 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 Chan's journal entries for the transactions.

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  1. 4 October, 18:57
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    The journal entries are shown below:

    On December 31:

    Bad debt expense A/c Dr $4,875 ($487,500 * 1%)

    To Allowance for Doubtful debts A/c $4,875

    (Being bad debt expense is recorded)

    On February 1:

    Allowance for doubtful accounts A/c $580

    To Accounts receivable A/c Dr $580

    (Being the uncollectible amount is recorded)

    On June 5:

    Accounts receivable A/c Dr $580

    To Allowance for doubtful accounts A/c $580

    (Being allowance for doubtful accounts is recorded)

    On June 5:

    Cash A/c Dr $580

    To Accounts receivable A/c Dr $580

    (Being the amount received)

    We assume the first entry is recorded on December 31
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