1. The business uses the Allowance Method for doubtful accounts for their accoun

Question

1. The business uses the Allowance Method for doubtful accounts for their accounts receivable.

Complete the journal entries for the following:

Business determines at end of year that 5% of accounts receivable is uncollectible. Accounts receivable at end of year was 300,000. This is their second year of operations, and the allowance has a credit balance of 1,000 before any adjustment.

Business determines an accounts receivable from Smith Co. of 25,000 is worthless and not collectible.

One month later Smith Co. pays 10,000 of their receivable.

Explanation / Answer

Bad debts expense 14000 =(300000*5%)-1000         Allowance for doubtful accounts 14000 Allowance for doubtful accounts 25000         Accounts receivable 25000 Accounts receivable 10000         Allowance for doubtful accounts 10000 Cash 10000         Accounts receivable 10000

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