Question

E9.8 (LO2), AP On December 31, 2021, when its Allowance for Doubtful Accounts

had a zero balance, Ling Co. estimated that 2% of its net accounts receivable of
$450,000 will become uncollectible and records the necessary adjustment to
Allowance for Doubtful Accounts. On May 11, 2022, Ling Co. determined that the Jeff
Shoemaker account was uncollectible and wrote off $1,100. On June 12, 2022,
Shoemaker paid the amount previously written off.
Instructions
Prepare the journal entries on December 31, 2021, May 11, 2022, and June 12, 2022.
Journalize entries for the sale of accounts receivable.

Answer 1

The journal entries on December 31, 2021, include a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts for the estimated uncollectible. On May 11, 2022, the write-off of an uncollectible account is recorded by debiting Allowance for Doubtful Accounts and crediting Accounts Receivable. On June 12, 2022, the payment of the previously written off amount is recorded by reinstating the receivable and then recording the cash received.

Step-by-step explanation:

The student's question pertains to journalizing entries for allowance for doubtful accounts and the subsequent write-off and recovery of an account receivable. On December 31, 2021, Ling Co. needs to record an estimated uncollectible amount for its accounts receivable. The entry to record bad debt expense would be a debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts for 2% of $450,000, which is $9,000.

On May 11, 2022, Ling Co. writes off Jeff Shoemaker's uncollectible account of $1,100 by debiting Allowance for Doubtful Accounts and crediting Accounts Receivable.

Then on June 12, 2022, when Shoemaker pays the amount previously written off, Ling Co. must reverse the write-off by debiting Accounts Receivable and crediting Allowance for Doubtful Accounts to reinstate the receivable, followed by debiting Cash and crediting Accounts Receivable to record the collection.

Here are the journal entries:

December 31, 2021

• 
  
• Bad Debts Expense 9,000
• 
  
• Allowance for Doubtful Accounts 9,000

May 11, 2022

• 
  
• Allowance for Doubtful Accounts 1,100
• 
  
• Accounts Receivable 1,100

June 12, 2022

• 
  
• Accounts Receivable 1,100
• 
  
• Allowance for Doubtful Accounts 1,100
• 
  
• Cash 1,100
• 
  
• Accounts Receivable 1,100

Answer 2

The journal entries for Ling Co. include an adjustment for bad debts on December 31, 2021, the write-off of an uncollectible account on May 11, 2022, and the reinstatement and collection of the same account on June 12, 2022.

Step-by-step explanation:

Journal Entries for Ling Co.

On December 31, 2021, Ling Co. estimated that 2% of its net accounts receivable will become uncollectible. Based on its net accounts receivable of $450,000, the necessary adjusting entry to record the estimated uncollectible accounts would be:

Dec 31, 2021
Bad Debt Expense 9,000
Allowance for Doubtful Accounts 9,000
(em>(To record estimated bad debts for the year))

Then, when the Jeff Shoemaker account was deemed uncollectible on May 11, 2022, the journal entry would be:

May 11, 2022
Allowance for Doubtful Accounts 1,100
Accounts Receivable - Jeff Shoemaker 1,100
(em>(To write off the uncollectible account))

Later, when Jeff Shoemaker paid the amount previously written off on June 12, 2022, Ling Co. would reverse the write-off and record the cash receipt with the following entries:

June 12, 2022
Accounts Receivable - Jeff Shoemaker 1,100
Allowance for Doubtful Accounts 1,100
(em>(To reverse the write-off of the uncollectible account))

June 12, 2022
Cash 1,100
Accounts Receivable - Jeff Shoemaker 1,100
(em>(To record collection of account previously written off))