Question

Direct Write-Off Method

Journalize the following transactions, using the direct write-off method of accounting for uncollectible receivables:

Oct. 2: Received $2,250 from Matthew Chapman and wrote off the remainder owed of $2,050 as uncollectible. If an amount box does not require an entry, leave it blank.

Oct. 2

Dec. 20: Reinstated the account of Matthew Chapman and received $2,050 cash in full payment.

Dec. 20-Reinstate
Dec. 20-Collection
Allowance Method Journalize the following transactions, using the allowance method of accounting for uncollectible receivables: Oct. 2. Received $2,230 from Paula Spitler and wrote off the remainder owed of $2,830 as uncollectible. If an amount box does not require an entry, leave it blank. Oct. 2 Dec. 20. Reinstated the account of Paula Spitler and received $2,830 cash in full payment. Reinstate Collection Percent of Sales Method At the end of the current year, Accounts Receivable has a balance of $585,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and sales for the year total $2,630,000. Bad debt expense is estimated at 1/2 of 1% of sales. a. Determine the amount of the adjusting entry for uncollectible accounts. $ b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. Adjusted Balance Debit (Credit) Accounts Receivable $ Allowance for Doubtful Accounts $ Bad Debt Expense $ c. Determine the net realizable value of accounts receivable. $

Answer 1

Solution 1:

Journal Entries - Direct Write-off method
Date	Particulars	Debit	Credit
02-Oct	Cash Dr	$2,250
	Bad Debt Expense Dr	$2,050
	To Accounts Receivable		$4,300
	(To record Cash received and balance written off)
20-Dec	Accounts Receivable Dr	$2,050
	To Bad debt expense		$2,050
	(To reinstate the account)
20-Dec	Cash Dr	$2,050
	To Accounts Receivable		$2,050
	(To record Cash received in full payment)

Solution 2:

Journal Entries - Allowance method
Date	Particulars	Debit	Credit
02-Oct	Cash Dr	$2,230
	Allowance for Doubtful accounts Dr	$2,830
	To Accounts Receivable		$5,060
	(To record Cash received and balance written off)
20-Dec	Accounts Receivable Dr	$2,830
	To Allowance for Doubtful accounts		$2,830
	(To reinstate the account)
20-Dec	Cash Dr	$2,830
	To Accounts Receivable		$2,830
	(To record Cash received in full payment)

Solution 3:

Percent of sales method:

(a) Amount of the adjusting entry for uncollectible accounts = Sales *1%*1/2 = $2,630,000*1%*1/2 = $13,150

(b) Adjusted balances of Accounts Receivable = $585,000

Adjusted balances of Allowance for Doubtful Accounts = $5500 + $13150 = $18,650

Bad Debt Expense = $13,150

(c) Net Realizable value of Accounts receivable = Adjusted balances of Accounts Receivable - Adjusted balances of Allowance for Doubtful Accounts =  $585,000 - $18,650 = $566,350