Question

Requirements 1. The T-accounts for Allowance for Bad Debts and Bad Debts Expense have been opened for you, assuming the accounts begin with a zero balance. Record the transactions in the general journal (omit explanations), and post to the two T-accounts. 2. Assume the December 31, 2019, balance of Accounts Receivable is $135,000. Show how net accounts receivable would be reported on the balance sheet at that date. More Info - X 2018 Dec. 31 Estimated that bad debts expense for the year was 1% of credit sales of $460,000 and recorded that amount as expense. The company uses the allowance method. 31 Made the closing entry for bad debts expense. 2019 Jan. 17 Sold merchandise inventory to Manny Vasquez, $800, on account. Ignore Cost of Goods Sold. Jun. 29 Wrote off Manny Vasquez's account as uncollectible after repeated efforts to collect from him. Aug. 6 Received $800 from Manny Vasquez, along with a letter apologizing for being so late. Reinstated Vasquez's account in full and recorded the cash receipt. Dec. 31 Made a compound entry to write off the following accounts as uncollectible: Brandon Kitter, $1,600; Mary Martin, $1,500; and Russel Weatherby, $200. Estimated that bad debts expense for the year was 1% on credit sales of $520,000 and recorded the expense. 31 Made the closing entry for bad debts expense. 31 Print Done

Answer 1

Solution to the above problem is as under:

Dec 31,2018: Estimated that bad debt expense for the year was 1% of credit sales of $460000 and recorded the amount as expense. The company uses the allowance method.

Date	Accounts and Explanation	Debit ($)	Credit ($)
Dec 31,2018	Bad Debt Expense A/c Dr	4600
(Adjustment)	To Allowance for Bad Debt A/c		4600
	(Being provision for bad debt created)

Dec 31,2018: Made the closing entry for Bad Debt Expense

Date	Accounts and Explanation	Debit ($)	Credit ($)
Dec 31,2018	Allowance for Bad Debt A/c Dr.	4600
(Closing Entry)	To Accounts Receivables		4600
	(Being closing entry made for Bad Debt Expense)

Statement showing recording of Journal Entries for the Year 2019
Date	Accounts and Explanation	Debit ($)	Credit ($)
Jan 17,2019	Accounts Receivable-Manny Vasquez A/c Dr.	800
	To Merchandise Inventory A/c		800
	(Being merchandise inventory sold on account)
June 29,2019	Bad Debt Expense A/c Dr.	800
	To Allowance for Bad Debt A/c		800
	(Being provision for bad debt created)
June 29,2019	Allowance for Bad Debt A/c Dr	800
	To Accounts Receivable-Manny Vasquez A/c		800
	(Being customer account written off)
August 6,2019	Accounts Receivable-Manny Vasquez A/c Dr.	800
	To allowance for Bad Debt A/c		800
	(Being customer account reinstated earlier written off)
August 6,2019	Cash A/c Dr.	800
	To Accounts Receivable-Manny Vasquez A/c		800
	(Being cash received from the customer earlier w/off)
August 6,2019	Allowance for Bad Debt A/c Dr.	800
	To Bad Debt Expense A/c		800
	(Being entry reversed on receipt of payment from the customer)
December 31,2019	Bad Debt Expense A/c Dr	3300
	To Allowance for Bad Debt A/c		3300
	(Being provision created for bad debt)
December 31,2019	Allowance for Bad Debt A/c Dr.	3300
	To Accounts Receivable-Brandon Kitter		1600
	To Accounts Receivable-Marry Martin		1500
	To Accounts Receivable-Russel Weatherby		200
	(Being customer account written off)
December 31,2019	Bad Debt Expense A/c Dr.	5200
	To Allowance for Bad Debt A/c		5200
	(Being provision for bad debt created)
December 31,2019	Allowance for Bad Debt A/c	5200
	To Accounts Receivables A/c		5200
	(Being closing entry passed for bad debt expense)

Posting the Journal Entries in T-Form Account

Allowance for Bad Debt Account
Date	Particulars	Amount ($)	Date	Particulars	Amount ($)
June 29,2019	To Accounts Receivable-Manny Vasquez	800	June 29,2019	By Bad Debt	800
		800			800
Aug 6,2019	To Bad Debt	800	Aug 6,2019	By Accounts Receivable-Manny Vasquez	800
		800			800
Dec 31,2019	To Accounts Receivable-Brandon Kitter	1600	Dec 31,2019	By Bad Debt	3300
	To Accounts Receivable-Marry Martin	1500
	To Accounts Receivable-Russel Weatherby	200
		3300			3300
Dec 31,2019	To Accounts Receivable	5200	Dec 31,2019	By Bad Debt	5200
		5200			5200

Bad Debt Expense Account
Date	Particulars	Amount ($)	Date	Particulars	Amount ($)
June 29,2019	To Allownce for Bad Debt	800	Aug 6,2019	By Allowance for Bad Debt	800
		800			800
Dec 31,2019	To Allownce for Bad Debt	3300
Dec 31,2019	To Allownce for Bad Debt	5200	Dec 31,2019	By Profit & Loss A/c	8500
		8500			8500

Requirement 2: Assume the December 31,2019, balance of Accounts Receivable is $135000. Show how net accounts receivable would be reported on the balance sheet at that date

Balance Sheet (Partial)
Assets	Working	Amount ($)
Current Assets:
Accounts Receivable	135000
Less: Bad Debt Expense	-8500	126500