At December 31 of the current year, Okrin Company reports that sales are $476,500. In addition,...
At December 31 of the current year, Okrin Company reports that sales are $476,500. In addition, the unadjusted trial balance shows that Accounts Receivable has a balance of $115,000 and the Allowance for Doubtful Accounts has a debit balance of $2,400.
The company estimates that bad debts are 3% of sales.
Prepare the adjusting journal entry that the company must make to recognize bad debts on December 31.
On January 15, the company determines that they will not be able to collect a $7,000 accounts receivable owed to them by their customer WC Co. Prepare the entry required on January 15.
On July 15 of the same year, Okrin Company unexpectedly receives a check from WC Co for the full amount of the written off debt. Prepare the journal entries required on July 15th.
Homework Answers
a) Adjusting entry
| Date | account and explanation | Debit | Credit |
| Dec 31 | Bad debt expense (476500*3%) | 14295 | |
| Allowance for doubtful accounts | 14295 |
b) Journal entry
| Date | account and explanation | Debit | Credit |
| Jan 15 | Allowance for doubtful account | 7000 | |
| Account receivable-WC Co | 7000 | ||
| (To record write off) |
c) Journal entry
| Date | account and explanation | Debit | Credit |
| July 15 | Account receivable-WC Co | 7000 | |
| Allowance for doubtful account | 7000 | ||
| (To record reinstate account) | |||
| Cash | 7000 | ||
| Account receivable-WC Co | 7000 | ||
| (To record collection) |
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