Question

Exercise 9-6 Percent of sales method; write-off P3 At year-end (December 31), Chan Company estimates its bad debts as 1% of its annual credit sales of $487,500. Chan records its bad debts expense for that estimate. On the following February 1, Chan decides that the $580 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 to record the transactions of December 31, February 1, and June 5.

Answer 1

Solution:

Date	General Journal	Debit	Credit
Dec. 31	Bad Debts Expense [487500*1%]	$    4,875
	Allowance for Uncollectible Accounts		$    4,875
	(To record bad debts expense)
Feb. 1	Allowance for Bad Debts	$        580
	Accounts Receivables		$        580
	(Account receivable write off)
June. 5	Accounts Receivables	$        580
	Allowance for Bad Debts		$        580
	(To record balance of accounts receivable is reinstate)
June. 5	Cash	$        580
	Accounts Receivables		$        580
	[Torecord the collection of receivables]