Question

Exercise 7-6 Percent of sales method; write-off LO P3 At year-end (December 31), Chan Company estimates its bad debts as 0.70% of its annual credit sales of $641,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $321 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.

Answer 1

Step-by-step explanation:

The journal entries are shown below:

December 31

Bad debt expense A/c Dr $448,700 ( $641,000 × 0.70%)

To Allowance for Doubtful debts $448,700

(Being bad debt expense is recorded)

February 1

Allowance for Doubtful debts A/c Dr $321

To Accounts receivable $321

(Being uncollectible amount is recorded)

June 5

Allowance for Doubtful debts A/c Dr $321

To Accounts receivable $321

(Being uncollectible amount is recorded)

June 5

Cash A/c Dr $321

To Accounts receivable $321

(Being previously written off recorded)