Question

The balance sheet of Cullumber Company at December 31, 2019, includes the following.

Notes receivable $44,400
Accounts receivable 188,800
Less: Allowance for doubtful accounts 23,800 $209,400
Transactions in 2020 include the following.
1. Accounts receivable of $149,500 were collected including accounts of $64,100 on which 4% sales discounts were allowed.
2. $5,590 was received in payment of an account which was written off the books as worthless in 2019.
3. Customer accounts of $24,000 were written off during the year.
4. At year-end, Allowance for Doubtful Accounts was estimated to need a balance of $27,600. This estimate is based on an analysis of aged accounts receivable.
Prepare all journal entries to reflect the transactions above.

Answer 1

Cash 146,936 debit

Sales discount 2,546 debit

Accounts Receivables 149,500 credit

--to record the collection of A/R--

Accounts Receivables 5,590 debit

Allowance for doubtful accounts 5,590 credit

Cash 5,590 debit

A/R 5,590 credit

--to record recovery of write-off accounts--

Allowance for doubtful accounts 24,000 debit

Accounts Receivables 24,000 credit

--to record write-off accounts--

bad debt expense 22,210 debit

Allowance for doubtful accounts 22,210 credit

--to record year-end adjustment for bad debt expense--

Step-by-step explanation:

1) sales discount: 64,100 x 4% = 2,564

cash proceeds: 149,500 - 2,564 = 146,936

2) we should reverse the write-off entry and reocrd the collection

3) we decrease both, the allowance and A/R by the uncollectible amount

4) we should adjust the allowance to match the estimated balance:

currnet balance:

DEBIT CREDIT

23,800

24,000

5,590

5,390

adj ?

ending B 27,600

adjusmtent: 27,600 - 5,390 = 22,210