Exercise 8-6 Prepare the journal entries on December 31, 2016, May 11, 2017, and

Question

Exercise 8-6

Prepare the journal entries on December 31, 2016, May 11, 2017, and June 12, 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.

Date

Account Titles and Explanation

Debit

Credit

(To reinstate account previously written off)

1. On December 31, 2016, when its Allowance for Doubtful Accounts had a debit balance of $1,413, Vaughn Manufacturing estimates that 11% of its accounts receivable balance of $93,300 will become uncollectible and records the necessary adjustment to Allowance for Doubtful Accounts. 2. On May 11, 2017, Vaughn Manufacturing determined that B. Jared’s account was uncollectible and wrote off $1,255. 3. On June 12, 2017, Jared paid the amount previously written off.

Explanation / Answer

Answer

11% of Accounts receivables = $93,300 x 11% = $10,263

This means that after adjusting entry, Allowance for doubtful accounts should have a CREDIT balance of $10,263

Balance in Allowance account before adjusting entry = $1,413 DEBIT
Hence, the allowance for doubtful account need to be credited by $1413 + $10263 = $11,676 to make it balance $10,263 CREDIT

No

Date

Account Titles and Explanation

Debit

Credit

1

December 31, 2016

Bad Debt expense

$ 11,676.00

$                 -  

Allowance for Doubtful Accounts

$                 -  

$ 11,676.00

(bad debts recorded)

2

May 11, 2017

Allowance for Doubtful Accounts

$    1,255.00

$                 -  

Accounts receivables

$                 -  

$    1,255.00

(receivables finally written off)

3

June 12, 2017

Accounts receivables

$    1,255.00

$                 -  

Allowance for Doubtful Accounts

$                 -  

$    1,255.00

(To reinstate account previously written off)

$                 -  

$                 -  

Cash

$    1,255.00

$                 -  

Accounts receivables

$                 -  

$    1,255.00

(cash received from receivables)

No

Date

Account Titles and Explanation

Debit

Credit

1

December 31, 2016

Bad Debt expense

$ 11,676.00

$                 -  

Allowance for Doubtful Accounts

$                 -  

$ 11,676.00

(bad debts recorded)

2

May 11, 2017

Allowance for Doubtful Accounts

$    1,255.00

$                 -  

Accounts receivables

$                 -  

$    1,255.00

(receivables finally written off)

3

June 12, 2017

Accounts receivables

$    1,255.00

$                 -  

Allowance for Doubtful Accounts

$                 -  

$    1,255.00

(To reinstate account previously written off)

$                 -  

$                 -  

Cash

$    1,255.00

$                 -  

Accounts receivables

$                 -  

$    1,255.00

(cash received from receivables)

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