P9-3A Journalize entries to record transactions related to bad debts . (LO 2) Pr
ID: 2489968 • Letter: P
Question
P9-3A
Journalize entries to record transactions related to bad debts.
(LO 2)
Presented below is an aging schedule for Halleran Company.
At December 31, 2017, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $12,000.
Instructions
(a)
Journalize and post the adjusting entry for bad debts at December 31, 2017.
Bad debt expense $26,610
(b)
Journalize and post to the allowance account the following events and transactions in the year 2018.
(i)
On March 31, a $1,000 customer balance originating in 2017 is judged uncollectible.
(ii)
On May 31, a check for $1,000 is received from the customer whose account was written off as uncollectible on March 31.
(c)
Journalize the adjusting entry for bad debts on December 31, 2018, assuming that the unadjusted balance in Allowance for Doubtful Accounts is a debit of $800 and the aging schedule indicates that total estimated bad debts will be $31,600.
Bad debt expense $32,400
Explanation / Answer
(a)
Bad debt expense A/c Dr 26,610
To Allowance for Doubtful A/c Cr 26,610
(To adjust allowance account)
(b)
(i) Allowance for Doubtful A/c Dr 1000
To Accounts Receivable Cr 1000
(Being customer balance written off)
(ii) Accounts Receivable A/c Dr 1000
To Allowance for Doubtful A/c Cr 1000
(To reverse write-off of customer earlier)
Cash A/c Cr 1000
To Accounts Receivable A/c 1000
(To record cash collection from customer)
(C)
Since there is a debit balance in the Allowance account, you would add the amount instead of subtracting it.
31,600 + 800 = 32,400
The adjustment entry shall be as follows-
Bad Debt Expense A/c Dr 38,100
To Allowance for Doubtful A/c Cr 38,100
(Bring balance adjusted)
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