Question

The income statement approach to estimating uncollectible accounts expense is used by Kerley Company. On February 28, the firm had accounts receivable in the amount of $437,000 and Allowance for Doubtful Accounts had a credit balance of $2,140 before adjustment. Net credit sales for February amounted to $3,000,000. The credit manager estimated that uncollectible accounts expense would amount to 1% of net credit sales made during February. On March 10, an accounts receivable from Kathy Black for $6,100 was determined to be uncollectible and written off. However, on March 31, Black received an inheritance and immediately paid her past due account in full.

Prepare the journal entries made by Hayes Company on the below dates: (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

1. Feb 28

2. March 10

3. March 31

Answer 1

No.	Date	Account Titles and Explanation	Debit	Credit
1	Feb. 28	Bad Debt Expense       [Net credit sales x 1% = $3,000,000 x 1%]	$30,000
		Allowance for Doubtful Accounts		$30,000
		(To record the bad debt expense for February)
2	Mar. 10	Allowance for Doubtful Accounts	$6,100
		Accounts Receivable - Kathy black		$6,100
		(To write off receivables from Kathy black)
3	Mar. 31	Accounts Receivable - Kathy black	$6,100
		Allowance for Doubtful Accounts		$6,100
		(To re-instate receivables previously written-off)
4	Mar. 31	Cash	$6,100
		Accounts Receivable - Kathy black		$6,100
		(To record payment from Kathy black)