Question

Chapter 9 - Practice Test Bad Debts Starsky and Hutch, Inc. has 5500 000 inim e sed SSO 000ccounts receive at the end of 2016 Prepare the appropriate entries given these three scenarios 1. The company uses the allowance med, and sumes that had debts will be 0.5% of sales. Before the adjustment, the allowance for doubtful account balance was 1.000 debit balance (A) The journal entry to record the bad del expense necrual at year end (12/31/16) (B) The subsequent write-off of an uncollectible amount 2/15/17) of $50 from Davy Jones (C) Record the unexpected payment received from Davy Jones on May 15, 2017 2. The company uses the allowance method, and assumes that had debis will be 5% of accounts receivable Before the adjustment, the allowance for doubtful account balance was $1.000 debit balance (A) The journal entry to record the bad debt e en raat year end (12/31/16) (B) The subsequent write-off of an uncollectible amount (2.15/17) of $50 from Davy Jones 3. The company uses the direct write-off method (A) The journal entry to record the bad debe expense accrual a year end (12/31/16) (B) The subsequent write-off of an uncollectible amount (2/15/17) of $50 from Davy Jones GENERAL JOURNAL Date Account Titles and Explanation PR. Debit Credit

Answer 1

Hi,

So to begin with, In scenario 1, the entries shall be as follows

First, reverse the existing allowance,

1) Allowance for bad debts A/c Dr 1,000$

To Bad debts Expense A/c Cr 1,000$

Provision for bad debts entry for current year.

2) Bad debts expense A/c Dr 2,500$

Allowance for bad debts A/c Cr 2,500$

For writing of Debtors Balance as uncollectible

3) Allowance for bad debts A/c Dr 50$

Debtors Account Cr 50$

Unexpected recovery of bad debts amount

4) Cash/Bank Account Dr. 50$

Allowance for bad debts A/c Cr 50$

For the second and third scenario the entries number 2 and 3 above shall be same as it is and only the amounts shall based on the percentages and figures given in the question.

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