Question

At year-end (December 31), Chan Company estimates its bad debts as 0.5% of its annual credit sales of $975,000. 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 the journal entries for these transactions.

Answer 1

The journal entries is as follows:

Step-by-step explanation:

December 31 Bad debts expense A/c.............Dr $ 4,875

To Allowance for doubtful accounts......Cr $4,875

February 1 Allowance for doubtful accountsA/c..........Dr $580

To Accounts receivable—P. Park..............Cr $580

June 5 Accounts receivable—P. Park A/c...............Dr $580

To Allowance for doubtful accounts A/c.....Cr $580

June 5 Cash A/c............................ Dr $580

To Accounts receivable—P. Park........Cr $580

Working Note:

December 31

Amount estimated = Annual Credit Sales × 0.5%

= $975,000 × 0.5%

= $4,875