Question

E8.4 (LO 1, 2), AP Assume the following information for Larry Corp. $142,000 11,360 945,000 910,000 5,200 Accounts receivable (beginning balance) Allowance for doubtful accounts (beginning balance) Net credit sales Collections Write-offs of accounts receivable Collections of accounts previously written off 1,900 Uncollectible accounts are expected to be 8% of the ending balance in accounts receivable. on Instructions a. Prepare the entries to record sales and collections during the period. b. Prepare the entry to record the write-off of uncollectible accounts during the period. c. Prepare the entries to record the recovery of the uncollectible account during the period d. Determine the ending balance in Accounts Receivable and the unadjusted balance in Allowance for Doubtful Accounts. e. Prepare the entry to record bad debt expense for the period. f. Determine the ending (adjusted) balance in Allowance for Doubtful Accounts

Answer 1

Debit Credit 945,000 Account Titles and Explanation Accounts receivable Sales revenue (to record sales) 945,000 910,000 Cash Accounts receivable (to record collections) 910,000 b) Debit Credit 5,200 Account Titles and Explanation Allowance for doubtful accounts Accounts receivable (to record write off) 5,200 Debit Credit 1,900 Account Titles and Explanation Accounts receivable Allowance for doubtful debts (to reinstate the write-off accounts) 1,900 Cash Accounts receivable (to record cash received for previously write-off) 1,900

d) Accounts receivable Unadjusted Allowance for doubtful accounts Ending Balance $ 171,800 $ 8,060 Working Notes: Accounts receivable Beginning Balance Add: Net Credit sales Less: Collections Less: Write off Add: Write off reinstate Less: Collection of write off accounts Ending Balance 142,000 945,000 (910,000) (5,200) 1,900 (1,900) 171,800 $ Allowance for doubtful accounts Beginning Balance Less: Write off of accounts receivable Add: Reinstate of write-off accounts Unadjusted allowance for doubtful accounts 11,360 (5,200) 1,900 8,060

$ e) Ending Balance of Accounts receivable Uncollectible percentage Allowance for doubtful accounts (171,800 x 8%) Less: Unadjusted allowance for doubtful accounts Bad debts expense 171,800 8% 13,744 $ (8,060) $ 5,684 Debit Credit 5,684 Account Titles and Explanation Bad debts expense Allowance for doubtful accounts (to record the bad debts expense) 5,684 Allowance for doubtful accounts (Ending Balance) $ 13,744 $ Working Notes: Ending Balance of Accounts receivable Uncollectible percentage Allowance for doubtful accounts (171,800 x 8%) 171,800 8% 13,744 $