YEAR X1 The allowance for doubtful accounts on 1-1-x1 had a credit balance of $2

Question

YEAR X1 The allowance for doubtful accounts on 1-1-x1 had a credit balance of $25,000. On 3-1-x1 wrote off a receivable for $12,000. On 5-1-X1 wrote off a receivable for $10,000. On 8-4-X1 a customer previously written off in a prior year agreed to pay. The amount due was $3,000 and the cash was received on 8-4-x1.

On 12-31-X1 the ending balance in the Accounts Receivable account was $525,000. Net credit sales for the year were $6,550,000. The company uses the percent of credit sales method and has had a bad debt rate of .005 (use number as is).

Answer the following (% credit sales method):
1. Do the journal entry for the write off on 3-1-x1



2. Do the journal entry for the write off on 5-1-x1



3. Do the journal entry for the recovery on 8-4-x1




4. Do the journal entry needed at year-end to record the bad debt estimate (% of net credit sales method).



5. What is the ending balance in the Allowance for doubtful accounts on 12-31-x1 (using the credit sales method) ___________

Explanation / Answer

1. Wrote off a receivable for $12,000 on 3-1-x1: Dr: Allowance for doubtful accounts  $12,000 Cr: Accounts receivable                    $12,000 Dr: Allowance for doubtful accounts  $12,000 Cr: Accounts receivable                    $12,000 2. Wrote off a receivable for $10,000 on 5-1-x1: Dr: Allowance for doubtful accounts  $10,000 Cr: Accounts receivable                    $10,000 3. Journal entry for the recovery on 8-4-x1: Dr: Cash                                 $3,000 Cr: Bad Debts recovered a/c   $3,000 4. Entry for estimated bad debt expenses: Dr: Bad Debts expenses                    $32,750 Cr: Allowance for doubtful accounts $32,750 5. Ending balance in allowance for doubtful accounts: 1-1-x1 Allowance for doubt ful account $25,000 3-1-x1 Wrote off ($12,000) 5-1-x1 Wrote off ($10,000) 12-31-x1 Estimated bad debts $32,750 12-31-x1 Ending balance in Allowance for doubt ful accounts $35,750 1-1-x1 Allowance for doubt ful account $25,000 3-1-x1 Wrote off ($12,000) 5-1-x1 Wrote off ($10,000) 12-31-x1 Estimated bad debts $32,750 12-31-x1 Ending balance in Allowance for doubt ful accounts $35,750
Thank you.... 1-1-x1 Allowance for doubt ful account $25,000 3-1-x1 Wrote off ($12,000) 5-1-x1 Wrote off ($10,000) 12-31-x1 Estimated bad debts $32,750 12-31-x1 Ending balance in Allowance for doubt ful accounts $35,750

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