Exercise 9-5 Percent of sales method; write-off LO P3 At year-end (December 31),

Question

Exercise 9-5 Percent of sales method; write-off LO P3

At year-end (December 31), Chan Company estimates its bad debts as 0.60% of its annual credit sales of $752,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $376 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.

Prepare the journal entries for these transactions.

Journal entry worksheet 2 3 4 Record the estimated bad debts expense. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31

Explanation / Answer

Bad Debts Expense = Estimated % × Credit Sales = 0.6% * 752000=4512

Dec 1 Bad debts Expenses $4512   

Allowances for Doubtful debts $4512

Feb 1 Provision for bad debts $376

Accounts Reciveable $376

June 5 Accounts reciveables $376

Provision for bad debts $376

June 5 Cash $376

Accounts reciveables $376

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