Question

At year-end (December 31), Chan Company estimates its bad debts as 0.70% of its annual credit sales of $672,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $336 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.

Required:
a. Prepare the journal entries for these transactions.1. Record the estimated bad debts expense.2. Record the entry to write off P. Park's account as uncollectible.3. Record the reinstatement of Park's previously written off account.4. Record the cash received on account.

Answer 1

Answer and Explanation:

The journal entries are shown below

As per the data given in the question,

Journal entries:

On Dec-31

Bad debt expense A/c Dr. $4,704 (0.007 × $672,000)

To Allowances for doubtful account Cr. $4,704

(Being the bad debt expense is recorded)

On Feb-01

Allowances for doubtful account Dr. $336

To Accounts receivable P. Park Cr. $336

(Being the allowance is recorded)

On Jun-05

Accounts receivable P. Park A/c Dr. $336

Allowances for doubtful account Cr. $336

(Being the reinstatement is recorded)

On Jun-05

Cash A/c Dr. $336

To Accounts receivable P. Park Cr. $336

(Being the cash received on account is recorded)