Question

For a business that uses the allowance method of accounting for uncollectible receivables:

Required:

a.	Journalize the entries to record the following:
1.	Record the adjusting entry at December 31, the end of the first fiscal year, to record the bad debt expense. The accounts receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600. Analysis of the receivables indicates uncollectible receivables of $18,000.*
2.	In March of the next year, the $350 owed by Fronk Co. on account is written off as uncollectible.*
3.	In November of the next year, $200 of the Fronk Co. account is reinstated and payment of that amount is received.*
4.	In December of the next year, $400 is received on the $600 owed by Dodger Co. and the remainder is written off as uncollectible.*
b.	Redo the entries in steps (2), (3), and (4) assuming the company uses the direct write-off method.*
	*Refer to the Chart of Accounts for exact wording of account titles.

a. Journalize the entries to record the following:
1.	Record the adjusting entry at December 31, the end of the first fiscal year, to record the bad debt expense. The accounts receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600. Analysis of the receivables indicates uncollectible receivables of $18,000.
	Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

2.	In March of the next year, the $350 owed by Fronk Co. on account is written off as uncollectible.
3.	In November of the next year, $200 of the Fronk Co. account is reinstated and payment of that amount is received.
4.	In December of the next year, $400 is received on the $600 owed by Dodger Co. and the remainder is written off as uncollectible.
	Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9

b. Redo the entries in steps (2), (3), and (4) assuming the company uses the direct write-off method. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9

Answer 1

Reqa JOURNAL No. DATE DESCRIPTION POST. REF. DEBIT 1 31-Dec Bad debt expense 18,600 Allowance for Doubtful Accounts J1 Next year 2 31-Mar Allowance for Doubtful Accounts J1 350 Accounts Receivable ACCOUNTING EQUATION CREDIT ASSETS LIABILITIES EQUITY Calculation (18,600) =18,000+600 18,600 (18,600) 350 (350) 350 3 200 Reinstated 30-Nov Accounts Receivable Allowance for Doubtful Accounts 200 (200) J1 200 200 Cash receipt 30-Nov Cash Accounts Receivable 200 (200) 200 4 31-Dec Cash Allowance for Doubtful Accounts Accounts Receivable 400 200 J1 400 200 (600) 600 Reqb JOURNAL POST. REF. DEBIT ACCOUNTING EQUATION CREDIT ASSETS LIABILITIES EQUITY (350) 350 (350) DATE DESCRIPTION 31-Mar Bad debt expense Accounts Receivable 2 350 3 200 200 Reinstated 30-Nov Accounts Receivable Bad debt expense 200 200 200 Cash receipt 30-Nov Cash Accounts Receivable 200 (200) 200 4 400 31-Dec Cash Bad debt expense Accounts Receivable 400 200 (200) 600 (600)