Question

Johnson company starts the year with $300,000 in A/R and records $1,000,000 in Net Credit sales during the year, of which 700,000 are collected. Allowance for Doubtful accounts has a beginning balance of $5,000. Write-Offs are $4,000 during the year, and $500 of previously written off were subsequently collected. Johnson estimated that 2% of ending A/R will not be collected (this will be the ending balance in Allowance for Doubtful Accounts.) (Use T accounts)

Required:

1. Record journal entries for write-offs, collections of prior write-offs and bad debt expense.

Answer 1

Journal entry

Date	account and explanation	Debit	Credit
	Allowance for doubtful accounts	4000
	Account receivable		4000
	(To record write off)
	Account receivable	500
	Allowance for doubtful accounts		500
	(To record reinstated)
	Cash	500
	Account receivable		500
	(To record collection)
	Bad debt expense (596000*2%-1500)	10420
	Allowance for doubtful accounts		10420
	(To record bad debt expense)