At year-end (December 31), Alvare Company estimates its bad debts as 0.70% of it
ID: 2375897 • Letter: A
Question
At year-end (December 31), Alvare Company estimates its bad debts as 0.70% of its annual credit sales of $762,000. Alvare records its Bad Debts Expense for that estimate. On the following February 1, Alvare decides that the $381 account of P. Coble is uncollectible and writes it off as a bad debt. On June 5, Coble unexpectedly pays the amount previously written off.
Prepare the journal entries of Alvare to record these transactions and events of December 31, February 1, and June 5...
At year-end (December 31), Alvare Company estimates its bad debts as 0.70% of its annual credit sales of $762,000. Alvare records its Bad Debts Expense for that estimate. On the following February 1, Alvare decides that the $381 account of P. Coble is uncollectible and writes it off as a bad debt. On June 5, Coble unexpectedly pays the amount previously written off.
Explanation / Answer
Allowance Method
December 31
Dr. Bad Debts Expense 5334
Cr. Allowance for Bad Debts 5334
February 1
Dr. Allowance for Bad Debts 381
Cr. Accounts Receivable 381
June 5
Dr. Accounts Receivable 381
Cr. Allowance for Bad Debts 381
Dr. Cash 381
Cr. Accounts Receivable 381
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