Question

At year-end (December 31), Chan Company estimates its bad debts as 0.80 % of its annual credit sales of $955,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $478 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. View transaction list ok Journal entry worksheet nt < 1 3 2 > nt ences Record the estimated bad debts expense. Note: Enter debits before credits. Credit Debit General Journal Date Dec 31 Next 3 of 8 <Prev

Answer 1

Solution

Date	General Journal	Debit	Credit
Dec-31	Bad debts expense	$       7,640.00
	Allowance for doubtful accounts		$ 7,640.00
	(To record bad debts expense)
Feb-01	Allowance for doubtful accounts	$           478.00
	Accounts receivable		$     478.00
	(To finally write of receivables)
Jun-05	Accounts receivable	$           478.00
	Allowance for doubtful accounts		$     478.00
	(To reinstate receivables)
Jun-05	Cash	$           478.00
	Accounts receivable		$     478.00
	(to record collection from receivable)

It is assumed that company uses allowance method instead of direct write off method.