At year-end (December 31), Chan Company estimates its bad debts as 0.60% of its annual credit...

At year-end (December 31), Chan Company estimates its bad debts as 0.60% of its annual credit sales of $665,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $333 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 Chan's journal entries for the transactions.

Record the estimated bad debts expense.
Wrote off P. Park's account as uncollectible.
Reinstated Park's previously written off account.
Record the cash received on account.

Expert Solution


	General Journal	Dr	Cr
1	record the estimated bad debts expenses
31st march	Provision for bad and doubtful debts	$3,990
	Debtors		$3,990
	(being provision create @0.6% on $665000)

	Written off the P Parks account as uncollected

	profit and loss account	$3,990
	Provision for bad and doubtful debts		$3,990
	(provison for bad debts transferd to p&l end of the year)
1st of February	Bad debts	$333
	P Park's		$333
	(Being the amount of $333 uncollected from P Parks)

5th June	P park's	$333
	Bad debts		$333
	(being bad debts recovered so the entry reversed)

	Cash	$333
	P park's		$333
	(Being cash received from the P Parks)

	Provision for bad debts is 0.6% of $665000 means $3900 ( 665000 X 0.6/100
	provision for bad debts is transfered to profit and loss account
	we have used direct method of accounting so we have reversed the bad debts entry

ekkarill92 answered 11 months ago

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