Question

Journal Entries for Credit Losses At the beginning of the year, the Dallas Company had the following accounts on its books: Accounts Receivable $264,000 Debit Allowance for Doubtful Accounts $16,500 Credit During the year, credit sales were $2,346,000 and collections on account were $2,350,000. The following transactions, among others, occurred during the year: Feb.17 Wrote off R. St. John's account, $7,500 May.28 Wrote off G. Herberger's account, $4,800 Oct.13 Received $1,200 from G. Herberger, who is in bankruptcy proceedings, in final settlement of the account written off on May 28. This amount is not included in the $2,350,000 collections. Dec. 15 Wrote off R. Clancy's account, $5,000 Dec.31 In an adjusting entry, recorded the allowance for doubtful accounts at 0.8% of credit sales for the year. Required a. Prepare journal entries to record the credit sales, the collections on account, and the preceding transactions and adjustment. b. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the December 31 balance sheet.

Answer 1

Requirement a:

Date	Account title and Explanation	Debit	Credit
Dec.31	Accounts receivable	$2,346,000
	Sales revenue		$2,346,000
	[To record credit sales for the year]
Dec.31	Cash	$2,350,000
	Accounts receivable		$2,350,000
	[To record collections on account for the year]
Feb.17	Allowance for doubtful account	$7,500
	Accounts receivable-R.St. John		$7,500
	[To write off R. St. John's account]
May 28	Allowance for doubtful account	$4,800
	Accounts receivable-G. Herberger		$4,800
	[To write off G. Herberger's account]
Oct 13	Accounts receivable-G. Herberger	$1,200
	Allowance for doubtful account		$1,200
	[To reinstate G. Herberger's account for partil recovery]
Oct 13	Cash	$1,200
	Accounts receivable-G. Herberger		$1,200
	[To record collection from G. Herberger]
Dec 15	Allowance for doubtful account	$5,000
	Accounts receivable-R. Clancy		$5,000
	[To write-off R. Clancy's account]
Dec 31	Bad debt expense [$2,346,000 x 0.8%]	$18,768
	Allowance for doubtful account		$18,768
	[To record allowance for doubtful accounts]

Requirement b:

Accounts Receivable	$242,700
Less: Allowance for Doubtful accounts	$19,168
Accounts receivable-net	$223,532

Calculations:

T-Accounts

Accounts receivable			Allowance for doubtful account
$264,000 Beg.				$16,500 Beg.
$2,346,000	$2,350,000		$7,500	$1,200
$1,200	$7,500		$4,800	$18,768
	$4,800		$5,000
	$1,200
	$5,000
$242,700 End.				$19,168 End.