Question

Randy has the following account balances on its balance sheet dated December 31, 2017: Accounts receivable 300,000 Less: Allowance for doubtful accounts (50,000) $250,000 2 Transactions in 2018 included the following: 1. Accounts receivable of $100,000 were collected. This amount included gross accounts of $50,000 on which 2% sales discounts were allowed. (Randy used the gross method for sales discounts.) 2. Accounts receivable of $10,000 that had been written off in 2017 were collected in 2018. 3. Accounts of $40,000 were written off in 2018. 4. At year end, an aging analysis suggested that of all the outstanding accounts receivable, $35,000 was uncollectible.

Prepare journal entries for each of the 4 transactions above.

Answer 1

Journal Entries:

Transaction	Account title and explanation	Debit	Credit
1	Cash	$99,000
	Sales discount [$50,000 x 2%]	$1,000
	Accounts receivable		$100,000
	[To record collections from customers]
2	Accounts receivable	$10,000
	Allowance for doubtful accounts		$10,000
	[To reinstate previously written off]
	Cash	$10,000
	Accounts receivable		$10,000
	[To record collection]
3	Allowance for doubtful account	$40,000
	Accounts receivable		$40,000
	[To record written off of uncollectibles]
4	Bad debt expense*	$15,000
	Allowance for doubtful accounts		$15,000
	[To record bad debt expense]

*Bad debt expense:

Allowance for doubtful account
		Beg. Bal.	$50,000
Written off	$40,000	Re-instate	$10,000
		Bad debt expense [Balance amount]	$15,000
End. Bal.	$35,000
Total	$75,000		$75,000