Question

Colorado rocky cookie company offers credit terms to its customers. at the end of 2024, accounts receivable totalled $650,000. the allowance method is used to account for uncollectible accounts. the allowance for uncollectible accounts had a credit balance of $37,000 at the beginning of 2024 and $23,500 in receivables were written off during the year as uncollectible. also, $1,700 in cash was received in December from a customer whose account previously had been written off. the company estimates bad debts by applying a percentage of 10% to accounts receivable at the end of the year. Prepare journal entries to record the write-off of receivables, the collection of $2,000 for previously written off receivables, and the year-end adjusting entry for bad debt expense.

Answer 1

To record the write-off of receivables, debit Allowance for Uncollectible Accounts and credit Accounts Receivable. To record the collection of previously written off receivables, debit Cash and credit Allowance for Uncollectible Accounts. To record the year-end adjusting entry for bad debt expense, debit Bad Debt Expense and credit Allowance for Uncollectible Accounts.

Step-by-step explanation:

To record the write-off of receivables, we will debit Allowance for Uncollectible Accounts and credit Accounts Receivable. To record the collection of $2,000 for previously written off receivables, we will debit Cash and credit Allowance for Uncollectible Accounts. To record the year-end adjusting entry for bad debt expense, we will debit Bad Debt Expense and credit Allowance for Uncollectible Accounts. Here are the journal entries:

1. Write-off of Receivables:

Debit: Allowance for Uncollectible Accounts - $23,500

Credit: Accounts Receivable - $23,500

2. Collection of Previously Written Off Receivables:

Debit: Cash - $1,700

Credit: Allowance for Uncollectible Accounts - $1,700

3. Year-end Adjusting Entry for Bad Debt Expense:

Debit: Bad Debt Expense - $64,500

Credit: Allowance for Uncollectible Accounts - $64,500