At December 31, 2005, Zurich Company reported this info on itsbalance sheet. Acc

Question

At December 31, 2005, Zurich Company reported this info on itsbalance sheet.

Accounts receivable $960,000
Less: Allowance for doubtful accounts $70,000

During 2006 the company had the following transactions related toreceivables.
1. Sales on account $3,800,000
2. Sales returns and allowances $50,000
3. Collections of accounts receivable $3,000,000
4. Write-offs of accounts receivable deemed uncollectible$90,000
5. Recovery of bad debts previously written off as uncollectible$40,000

Prepare the journal entry to record bad debts expense for 2005,assuming that aging the accounts receivable indicates that expectedbad debts are $110,000.

Explanation / Answer

Allowance for Doubtful Account, Dec 31, 2005 70,000 Less: Write-Offs 90,000 Add: Recovery 40,000 Allowance for Doubtful Account, Dec 31,2006 20,000 Expected bad debts is $110,000 journal entry as Bad DebtExpense                                 90,000     Allowance for DoubtfulAccount                              90,000

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