Question

At December 31, 2020, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $16,000. Instructions Journalize and post the adjusting entry for bad debts at December 31, 2020. Journalize and post to the allowance account the following events and transactions in the year 2020. March 1, a $1,900 customer balance originating in 2020 is judged uncollectible. May 1, a check for $1,900 is received from the customer whose account was written off as uncollectible on March 1. Journalize the adjusting entry for bad debts on December 31, 2020. Assume that the unadjusted balance in Allowance for Doubtful Accounts is a debit of $2,000, and the aging schedule indicates that total estimated bad debts will be $38,300.

Answer 1

a. Journal Entry

Date Account Titles Debit Credit

Dec 31 Bad Debts Expense $16,000

Allowance for Doubtful Accounts $16,000

To record bad debts expense.

b. Journal Entries:

Date Account Titles Debit Credit

Mar 1 Allowance for

Doubtful Accounts $1,900

Accounts Receivable $1,900

To record the write-off of uncollectible account.

Date Account Titles Debit Credit

May 1 Accounts Receivable $1,900

Allowance for Doubtful Accounts $1,900

To record the reversal of the March 1, 2020 entries.

Date Account Titles Debit Credit

May 1 Cash $1,900

Accounts Receivable $1,900

To record the receipt of check from the customer.

c. Journal Entries:

Date Account Titles Debit Credit

Dec. 31 Bad Debts Expense $40,300

Allowance for Doubtful Accounts $40,300

To record bad debts expense and bring the Allowance for Doubtful Accounts to a credit balance of $38,300.

Explanation:

a) Adjusting journal entries are necessary to ensure that the accounts are reported in accordance with the accrual concept.