Question

In its first year of operations, 20X2,ABC Companyy., had credit sales of $420,000 to many different customers. Of this amount, Cindy Mol purchased $400 and J. Jocke purchased $180 on account. During the year, cash collections of $389,000 were made, of which Cindy Mol paid $360 and J. Jocke paid $60. At the end of 20X2, bad debts expense was estimated to be 5% of ending accounts receivable. At December 31, 20X2, the Allowance for Uncollectible Accounts is $0. On February 23, 20X3, the balance in J. Jocke's account was written off as uncollectible.

Prepare the appropriate journal entry on the books of ABC Company for

a. the $420,000 in credit sales.

b. the collection of $389,000 from credit customers.

c. the estimation of bad debts expense.

d. the write-off of J. Jocke's account.

Answer 1

Journal
Date	Particulars	Debit	Credit
a	Accounts Recievable	$ 420,000.00
Sales		$ 420,000.00
(Credit Sales in 20X2)
b	Cash	$ 389,000.00
Accounts Recievable		$ 389,000.00
(Collection from Customers)
c	Bad debt Expense	$     1,550.00
Accounts Recievable		$     1,550.00
(Bad debt Expense booked for the period)
Feb-23	Bad debt Expense	$        120.00
Accounts Recievable (J.Jockes Account)		$        120.00
(written off balance in j jockes Account)

Workings

Computation of Bad debt expense
Particulars	Amount $
Credit Sales	420,000.00
Less :collection	389,000.00
Balance in Accounts Recievable	31,000.00
Bad debt expense @ 5% above	1,550.00
Computation of balance of J. jockes
Particulars	Amount $
Sales to j jock	180.00
Less:Collection from J. jock	60.00
Balance	120.00