Question

Accounts receivable transactions are provided below for J Pharoah Co. Dec. 31, 2020 The company estimated that 4% of its accounts receivable would become uncollectible. The balances in the Accounts Receivable account and Allowance for Doubtful Accounts were $661,000 and $2,700 (debit), respectively. Mar. 5, 2021 The company determined that R. Mirza’s $3,500 account and D. Wight’s $6,900 account were uncollectible. The company’s accounts receivable were $691,400 before the accounts were written off. June 6, 2021 Wight paid the amount that had been written off on March 5. The company’s accounts receivable were $650,600 prior to recording the cash receipt for Wight.

a.) Prepare the journal entries on December 31, 2020, March 5, 2021, and June 6, 2021.

(To record estimate of uncollectible accounts.)

(To record write off of accounts receivable.)

(To record write off of accounts receivable.)

(To reverse write off.)

(Collection of account that was previously written off.)

Answer 1

(1) First we will determine the amount of bad debt expense to be rcorded, here note that allowance for doubtful account has credit balance .

$661,000*4% =$26,440

Allowance for doubtful account has $2,700 debit so to make it credit $26,440 , we will have to debit bad debt account by ($2,700+$26,440) =$29,140

		Debit	Credit
Dec 31,2020	Bad debt expense	$29,140
	Allowance fo doubtful account		$29,140

(2) recording uncollectible

Here, bad debt expense has already been debited while creating allowance for doubtful account(as above)

so, while recording uncollectible we will not again record expense but debit allowance for doubtful account.

		Debit	Credit
Mar 05, 2021	Allowance for doubtful account	$3,500
	Account receivable		$3,500

		Debit	Credit
March 05,2021	Allowance for doubtful account	$6,900
	Account receivable		$6,900

(3) To reverse write off

we will debit account receivable and credit allowance doubtful account

		Debit	Credit
Jun 06,2021	Account receivable	$6,900
	Allowance for doubtful account		$6,900

(4)collection of previously written off account

		Debit	Credit
Jun 06,2021	Cash	$6,900
	Account receivable		$6,900