Question

For a business that uses the allowance method of accounting for uncollectible receivables:

Required:

(a)	Journalize the entries to record the following:
(1)	Record the adjusting entry at December 31, the end of the first fiscal year, to record the bad debt expense. The accounts receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600. Analysis of the receivables indicates uncollectible receivables of $18,000.*
(2)	In March of the next year, the $350 owed by Fronk Co. on account is written off as uncollectible.*
(3)	In November of the next year, $200 of the Fronk Co. account is reinstated and payment of that amount is received.*
(4)	In December of the next year, $400 is received on the $600 owed by Dodger Co. and the remainder is written off as uncollectible.*
(b)	Redo the entries in steps (2), (3), and (4) assuming the company uses the direct write-off method.*
	*Refer to the Chart of Accounts for exact wording of account titles.

Journalize the entries to record the following:
(1)	Record the adjusting entry at December 31, the end of the first fiscal year, to record the bad debt expense. The accounts receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600. Analysis of the receivables indicates uncollectible receivables of $18,000.
	Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	Text entry invalid
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(2)	At March 1 of the next year, the $350 owed by Fronk Co. on account is written off as uncollectible.
(3)	At November 5 of the next year, $200 of the Fronk Co. account is reinstated and payment of that amount is received.
(4)	At December 15 of the next year, $400 is received on the $600 owed by Dodger Co. and the remainder is written off as uncollectible.
	Refer to the Chart of Accounts for exact wording of account titles.

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Redo the entries in steps (2), (3), and (4) assuming the company uses the direct write-off method. Refer to the Chart of Accounts for exact wording of account titles.

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Answer 1

Allowance of doubtful account (credit balance) after adjustment (500000*1%)	$        18,000
Add: Allowance of doubtful account (debit balance) available before adjustment (As per question) (debit balance means extra adjustment required to made.)	$              600
Adjustment of bad debts expense	$        18,600

	Answer A: Allowance method (for first entry)
	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	December 31	Bad debts expense		$       18,600
2		Allowance of doubtful account			$     18,600
		To record Bed debts expense
	Answer A: Allowance method (for entries in steps (2), (3), and (4))
	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	December 31	Allowance for Doubtful Accounts		$             350
2		Accounts receivable - Fronk Co.			$           350
		To record account write off
3	March	Accounts receivable - Fronk Co.		$             200
4		Allowance for Doubtful Accounts			$           200
		To reinstate Accounts receivable
5	November	Cash		$             200
6		Accounts receivable - Fronk Co.			$           200
		To record cash collected from previously write off accounts.
7	December	Cash		$             400
8		Allowance for Doubtful Accounts (600-400)		$             200
9		Accounts receivable			$           600
		To record cash collected from accounts receivable and remaining portion Write off.
	Answer B: Direct write-off method (for entries in steps (2), (3), and (4))
	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	December 31	Bad Debts Expense		$             350
2		Accounts receivable - Fronk Co.			$           350
		To record account write off
3	March	Accounts receivable - Fronk Co.		$             200
4		Bad Debts Recovered			$           200
		To reinstate Accounts receivable
5	November	Cash		$             200
6		Accounts receivable - Fronk Co.			$           200
		To record cash collected from previously write off accounts.
7	December	Cash		$             400
8		Bad Debts Expense (600-400)		$             200
9		Accounts receivable			$           600
		To record cash collected from accounts receivable and remaining portion Write off.