Question

On December 31, 2013, when its Allowance for Doubtful Accounts had a debit balance of $1,400, Hunt Co. estimates that 9% of its accounts receivable balance of $90,000 will become uncollectible and records the necessary adjustment to Allowance for Doubtful Accounts.

2. On May 11, 2014, Hunt Co. determined that J. Byrd’s account was uncollectible and wrote off $1,200.

3. On June 12, 2014, Byrd paid the amount previously written off.


Prepare the journal entries on December 31, 2013, May 11, 2014, and June 12, 2014.

Answer 1

1. On December 31, 2013

Debit Bad debts expense $9,500

Credit Allowance for Doubtful Accounts $9,500

2. On May 11, 2014

Debit Allowance for Doubtful Accounts $1,200

Credit Accounts Receivable $1,200

3. On Jun 12, 2014

Debit Accounts Receivable $1,200

Credit Allowance for Doubtful Accounts $1,200

Assuming that Byrd paid by cash

Debit Cash $1,200

Credit Accounts Receivable $1,200

Step-by-step explanation:

1. On December 31, 2013,

Bad debts are estimated: 9% x $90,000 = $8,100

Before adjusting, Allowance for Doubtful Accounts had a debit balance of $1,400. So Bad debts expense will be: $1,400 + $8,100 = $9,500

The adjustment to record Allowance for Doubtful Accounts:

Debit Bad debts expense $9,500

Credit Allowance for Doubtful Accounts $9,500

2. On May 11, 2014, when wrote off receivable, the company made the entry to reduce the balances in the Allowance for Doubtful Account and Acccounts Receivable.

3. June 12, 2014, Byrd paid the amount previously written off. Hunt Co., reversed part of the previous entry, by increasing the balances of both Accounts Receivable and the Allowance for Doubtful Account.