Question

On December 31, 2019, Novak Corp. estimated that 4% of its net accounts receivable of $414,400 will become uncollectible. The company recorded this amount as an addition to Allowance for Doubtful Accounts. The allowance account had a zero balance before adjustment on December 31, 2019. On May 11, 2020, Novak Corp. determined that the Jeff Shoemaker account was uncollectible and wrote off $2,072. On June 12, 2020, Shoemaker paid the amount previously written off.

Prepare the journal entries on December 31, 2019, May 11, 2020, and June 12, 2020.

Answer 1

bad debt expense 1,656 debit

allowance for doubtful accounts 1,656 credit

--to record bad debt expense expected--

allowance for doubtful accounts 2,072 debit

accounts receivable 2,072 credit

--to record Shoemaker account's write-off--

accounts receivables 2,072 debit

allowance for doubtful accounts 2,072 credit

--to record recovery from Shoemaker--

cash 2,072 debit

accounts receivables 2,072 credit

--to record collection from Shoemaker--

Step-by-step explanation:

expected uncollected

414,400 x 4% = 1,656

When doing a write-off the company will debit the allowance and decrease the Account Receivables for the customer write-off account.

If latter the account is recovered, the company will reverse the write-off entry. Then, proceed to record the collection like a normal account.