Question

During 2021, its first year of operations, Pave Construction provided services on account of $156,000. By the end of 2021, cash collections on these accounts total $108,000. Pave estimates that 20% of the uncollected accounts will be uncollectible. In 2022, the company wrote off uncollectible accounts of $8,640. Record the write-off of accounts receivable in 2022. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Pave Construction wrote off $8,640 of uncollectible accounts in 2022. The journal entry to record this write-off debits Allowance for Doubtful Accounts and credits Accounts Receivable for the same amount.

Step-by-step explanation:

During 2021, Pave Construction provided services on account totaling $156,000. The cash collections on these accounts by the end of the year totaled $108,000. With the estimation that 20% of the uncollected accounts would be uncollectible, Pave Construction would have anticipated an uncollectible amount of $9,600 ([$156,000 - $108,000] x 20%). However, in 2022, the actual uncollectible accounts amounted to $8,640, which is written off. The journal entry to record this write-off in 2022 would be a debit to the Allowance for Doubtful Accounts and a credit to Accounts Receivable for $8,640.

Journal Entry:

• Debit Allowance for Doubtful Accounts $8,640
• Credit Accounts Receivable $8,640