Question

At year-end (December 31), Chan Company estimates its bad debts as 0.40% of its annual credit sales of $979,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $490 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.

Prepare Chan's journal entries for the transactions.

Answer 1

Dec 31	Bad debts expense	3916
	Allowance for Doubtful Accounts		3916
	(979,000*0.4%)
Feb 1	Allowance for Doubtful Accounts	490
	Accounts Receivable - P park		490
June 5	Accounts Receivable - P park	490
	Allowance for Doubtful Accounts		490
June 5	Cash	490
	Accounts Receivable - P park		490