Question

Exercise 5-7A Establish an allowance for uncollectible accounts and write off accounts receivable (LO5-3, 5-4)

During 2021, its first year of operations, Pave Construction provides services on account of $128,000. By the end of 2021, cash collections on these accounts total $94,000. Pave estimates that 25% of the uncollected accounts will be uncollectible. In 2022, the company writes off uncollectible accounts of $7,650.
 

Required:

1. Record the adjusting entry for uncollectible accounts on December 31, 2021.

2-a. Record the write-off of accounts receivable in 2022.

2-b. Calculate the balance of Allowance for Uncollectible Accounts at the end of 2022 (before adjustment in 2022).

3-a. Assume the same facts as above but assume actual write-offs in 2022 were $11,475. Record the write-off of accounts receivable in 2022

3-b. Assume the same facts as above but assume actual write-offs in 2022 were $11,475. Calculate the balance of Allowance for Uncollectible Accounts at the end of 2022 (before adjustment in 2022).

Answer 1

Date	General Journal					Debit	Credit
12/31/2021	Bad debts expense					8500
	Allowance for uncollectible accounts						8,500
	(128000-94000)*25%
2-a)
12/31/2022	Allowance for uncollectible accounts					7,650
	Accounts receivable						7,650
2-b)
	Beginning balance in 2022				8500
	less:	Write off			7,650
	Ending balance in 2022				850
3-a)
12/31/2022	Allowance for uncollectible accounts					11,475
	Accounts receivable						11,475
2-b)
	Beginning balance in 2022				8500
	less:	Write off			11,475
	Ending balance in 2022				-2,975