The trial balance of Watson International for Dec. 31, 2016, includes the follow
ID: 2467403 • Letter: T
Question
The trial balance of Watson International for Dec. 31, 2016, includes the following balances:
Debit Credit
Sales $600,000 (credit
Sales Returns Allowances $32,000 (debit)
Accounts Recievable $140,000 (debit)
Allowance for Doubtful Accts $4,700 (credit
If the estimate for uncollectibles is made by taking 2% of net sales, estimate bad debt expense and provide the journal entry to fund the Allowance for Bad Debts account.
If the estimate for uncollectibles is made by taking 11% of gross account receivables, estimate bad debt expense and provide the journal entry to fund the Allowance for Bad Debts account.
Provide the journal entry to write off $7200 in accounts receivables.
Suppose $2400 of the $7200 previously written off receivables ended up being paid. What journal entry (or entries) would you use to handle this transaction.
Explanation / Answer
Solution :
sales
600,000
Less :Sales Returns Allowances
- 32,000
net sales
568,000
Closing balance of Allowance for Doubtful Accts
11,360
(568000*.02)
Less : Existing balance in allowance
- 4,700
Bad debts expense
6,660
Bad debts expense
6,660
Allowance for uncollectible
6,660
(Bad debts recognised)
Closing balance of Allowance for Doubtful Accts
15,400
(140000*11%)
Less : Existing balance in allowance
- 4,700
Bad debts expense
10,700
Bad debts expense
10,700
Allowance for uncollectible
10,700
(Bad debts recognised)
journal entry to write off $7200 in accounts receivables.
Allowance for uncollectible
7,200
Accounts receivable
7,200
(Write off bad debts)
2400 of the $7200 previously written off receivables ended up being paid. - Two entries are passed
Accounts receivable
2,400
Allowance for uncollectible
2,400
(Revesal of write off entry)
cash
2,400
Accounts receivable
2,400
sales
600,000
Less :Sales Returns Allowances
- 32,000
net sales
568,000
Closing balance of Allowance for Doubtful Accts
11,360
(568000*.02)
Less : Existing balance in allowance
- 4,700
Bad debts expense
6,660
Bad debts expense
6,660
Allowance for uncollectible
6,660
(Bad debts recognised)
Closing balance of Allowance for Doubtful Accts
15,400
(140000*11%)
Less : Existing balance in allowance
- 4,700
Bad debts expense
10,700
Bad debts expense
10,700
Allowance for uncollectible
10,700
(Bad debts recognised)
journal entry to write off $7200 in accounts receivables.
Allowance for uncollectible
7,200
Accounts receivable
7,200
(Write off bad debts)
2400 of the $7200 previously written off receivables ended up being paid. - Two entries are passed
Accounts receivable
2,400
Allowance for uncollectible
2,400
(Revesal of write off entry)
cash
2,400
Accounts receivable
2,400
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