Question

In: Accounting

If a company writes off a Bad Debt Account at the end of a year and...

If a company writes off a Bad Debt Account at the end of a year and subsequently recovers the written off amount the following year, what should it do to record this transaction – explain?

Solutions

Expert Solution

If a company writes off a Bad Debt Account at the end of a year and subsequently recovers the written off amount the following year, it should first reinstate the written of account by debiting Accounts Receivable and crediting Allowance for Bad Debts. Then, it should record the collection on the account by debting Cash and crediting Accounts Receviable.

Assume that a company wrote off a bad debt account with balance of $1,000 at the end of a year and subsequently recoveres the written off amount of $1,000 in the following year.

The first entry to reinstate the written off account will be made as follows:

Account Titles and Explanation Debit Credit
Accounts receivable 1,000
Allowance for bad debts 1,000

The second entry to record the collection on the written off account will be prepared as follows:

Account Titles and Explanation Debit Credit
Cash 1,000
Accounts receivable 1,000

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

The bank's provisions for bad and doubtful debt amount to $20 million. The bank writes off $18 million non-performing loans.
QUESTION 17The bank's provisions for bad and doubtful debt amount to $20 million. The bank writes off $18 million non-performing loans.As a result of the write off, the gross loans ___________________, the net loans _____________________ and bank's equity _______________.A.decreases by $20 million; decreases by $18 million; decreases by $2 million.B.does not change; decreases by $2 million; decreases by $2 million.C.decreases by $18 million; does not change; does not change.D.decreases by $18 million; decreases by $18 million; does not change.E.decreases by...
Notes: •Direct write-off method: records bad debt expense only when an account is judged to be...
Notes: •Direct write-off method: records bad debt expense only when an account is judged to be worthless •Allowance method: records bad debt expense by estimating uncollectible accounts at the end of the accounting period --On August 31, Target Inc. had an unadjusted credit balance of $1,500 in its Allowance for Uncollectible Account. An analysis of Target Inc.’s accounts receivables revealed the following: (Target Inc. uses the aging of receivables method to estimate its bad debt expense) Age (days)                  Amount                      ...
Entries for Bad Debt Expense under the Direct Write-Off and Allowance Method Casebolt Company wrote off...
Entries for Bad Debt Expense under the Direct Write-Off and Allowance Method Casebolt Company wrote off the following accounts receivable as uncollectible for the first year of its operations ending December 31: Customer Amount Shawn Brooke $19,600 Eve Denton 18,300 Art Malloy 25,100 Cassie Yost 4,700 Total 67,700 a. Journalize the write-offs under the direct write-off method. If an amount box does not require an entry, leave it blank. Bad Debt Expense Accounts Receivable-Shawn Brooke Accounts Receivable-Eve Denton Accounts Receivable-Art...
Flyer Company has provided the following information prior to any year-end bad debt adjustment: Cash sales,...
Flyer Company has provided the following information prior to any year-end bad debt adjustment: Cash sales, $168,000 Credit sales, $468,000 Selling and administrative expenses, $128,000 Sales returns and allowances, $48,000 Gross profit, $508,000 Accounts receivable, $285,000 Sales discounts, $32,000 Allowance for doubtful accounts credit balance, $3,000 Flyer prepares an aging of accounts receivable and the result shows that 3% of accounts receivable is estimated to be uncollectible. What is the balance in the allowance for doubtful accounts after bad debt...
Ervin Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is...
Ervin Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2021, net credit sales totaled $5,400,000, and the estimated bad debt percentage is 1.50%. No previously written-off accounts receivable were reinstated during 2021. The allowance for uncollectible accounts had a credit balance of $51,000 at the beginning of 2021 and $44,500, after adjusting entries, at the end of 2021. Required: 1. What is bad debt expense for 2021...
Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end...
Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the...
Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end...
Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the...
Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end...
Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the...
Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods Seaforth International wrote off...
Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31: Customer Amount Kim Abel $21,550 Lee Drake 33,925 Jenny Green 27,565 Mike Lamb 19,460 Total $102,500 The company prepared the following aging schedule for its accounts receivable on December 31: Aging Class (Number of Days Past Due) Receivables Balance on December 31 Estimated Percent of Uncollectible Accounts 0-30 days $715,000 1% 31-60...
Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods Seaforth International wrote off...
Entries for Bad Debt Expense Under the Direct Write-Off and Allowance Methods Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31: Customer Amount Kim Abel $21,550 Lee Drake 33,925 Jenny Green 27,565 Mike Lamb 19,460 Total $102,500 The company prepared the following aging schedule for its accounts receivable on December 31: Aging Class (Number of Days Past Due) Receivables Balance on December 31 Estimated Percent of Uncollectible Accounts 0-30 days $715,000 1% 31-60...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT