Question

Mar. 17 Received $275 from Shawn McNeely and wrote off the remainder owed of $1,000 as uncollectible.

July 29 Reinstated the account of Shawn McNeely and received $1,000 cash in full payment.
Journalize the above transactions, using the allowance method of accounting for uncollectible receivables. Refer to the Chart of Accounts for exact wording of account titles.

Journalize the transactions, using the allowance method of accounting for uncollectible receivables. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Answer: Please see the required journals below:

Mar. 17:

Debit Allowance for doubtful accounts $1,000

Credit Accounts receivable $1,000

July 29:

Debit Cash $1,000

Credit Bad debt recovery (income statement) $1,000

Explanation: On March 17, when $275 was received from Shawn and the remaining balance of $1,000 was written off, the allowance for doubtful accounts has to be debited since the company adopts the allowance method of accounting for uncollectible receivables. Note that the allowance account would have the required buffer to take care of this debit. Similarly, when the recovery was made, cash would be debited then the credit would default to income statement.