Question

At the beginning of the current period, Tamarisk, Inc. had balances in Accounts Receivable of $187,100 and in Allowance for Doubtful Accounts of $8,500 (credit). During the period, it had net credit sales of $767,100 and collections of $699,230. It wrote off as uncollectible accounts receivable of $7,528. However, a $3,284 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $26,620 at the end of the period.

(a) Prepare the entries to record sales and collections during the period.
(b) Prepare the entry to record the write-off of uncollectible accounts during the period.
(c) Prepare the entries to record the recovery of the uncollectible account during the period.
(d) Prepare the entry to record bad debt expense for the period.

Answer 1

(a) Net credit sales: $767,100; Collections: $699,230

(b) Allowance for Doubtful Accounts: $7,528

(c) Accounts Receivable: $3,284; Allowance for Doubtful Accounts: $3,284

(d) Bad debt expense: $30,412

Step-by-step explanation:

(a) To record sales and collections, we calculate net credit sales by subtracting collections ($699,230) from total credit sales ($767,100).

(b) The write-off of uncollectible accounts during the period is recorded by debiting Allowance for Doubtful Accounts and crediting Accounts Receivable for the amount of $7,528.

(c) The recovery of the uncollectible account is recorded by debiting Accounts Receivable and crediting Allowance for Doubtful Accounts for the recovered amount of $3,284.

(d) To record bad debt expense for the period, we sum the write-offs ($7,528) and the estimated uncollectible accounts at the end of the period ($26,620), resulting in a total bad debt expense of $30,412.

This entry involves debiting Bad Debt Expense and crediting Allowance for Doubtful Accounts.

The Bad Debt Expense reflects the anticipated losses due to uncollectible accounts, and the Allowance for Doubtful Accounts represents the estimated total uncollectible amount at the end of the period.