Question

CP 7–4
Koss Co. Ltd. began operations on January 1, 2018. It had the following
transactions during 2018, 2020, and 2021.
2018 Dec. 31 Estimated uncollectible accounts as $5,000 (calculated
as 2% of sales)
2020 Apr. 15 Wrote off the balance of N. Lang, $700
Aug. 8 Wrote off $3,000 of miscellaneous customer accounts
as uncollectible
Dec. 31 Estimated uncollectible accounts as $4,000 (1½% of
sales)
2021 Mar. 6 Recovered $200 from N. Lang, whose account was
written off in 2020; no further recoveries are expected
Sept. 4 Wrote off as uncollectible $4,000 of miscellaneous
customer accounts
Dec. 31 Estimated uncollectible accounts as $4,500 (1½% of
sales).
CHAPTER SEVEN / Cash and Receivables First US Edition
Required:
1. Prepare journal entries to record the above transactions.
2. Assume that management is considering a switch to the balance
sheet method of calculating the allowance for doubtful accounts.
Under this method, the allowance at the end of 2021 is estimated
to be $2,000. Comment on the discrepancy between the two
methods of estimating allowance for doubtful accounts.

Answer 1

Journal entries
Date	Particulars	Debit $	Credit $
2018
Dec-31	Bad debt Expense	5,000
	Allowance for Doubtful Accounts		5,000
	( being Estimated uncollectible accounts as $5,000)
2020
Apr-15	Allowance for Doubtful Accounts	700
	Account receivables		700
	( being account wrote off the balance)
Aug-08	Allowance for Doubtful Accounts	3,000
	Account receivables		3,000
	( being wrote off $3,000 of miscellaneous customer accounts as uncollectible)
Dec. 31	Bad debt Expense	4,000
	Allowance for Doubtful Accounts		4,000
	( being Estimated uncollectible accounts as $4,000)
2021
Mar. 6	Account receivables	200
	Allowance for Doubtful Accounts		200
	(being recovered from doubtful)
	Cash/Bank	200
	Account receivables		200
	Being cash recovered fromN lang)
Sept. 4	Allowance for Doubtful Accounts	4,000
	Account receivables		4,000
	( being account wrote off the balance)
Dec-31	Bad debt Expense	4,500
	Allowance for Doubtful Accounts		4,500
	( being Estimated uncollectible accounts as $4,500)

2.Due to usage of fixed percentage on sales in question 1 whereas it was not folowed in balance sheet method