Question

Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2013, accounts receivable totaled $650,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $37,000 at the beginning of 2013 and $23,500 in receivables were written off during the year as uncollectible. Also, $1,700 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 10% to accounts receivable at the end of the year.

Required:

1.	Prepare journal entries to record the write-off of receivables, the collection of $1,700 for previously written off receivables, and the year-end adjusting entry for bad debt expense.

Answer 1

End of 2013 :
accounts receivable totaled $650,000
credit balance of $37,000
Beginning of 2013 :
$23,500 in receivables
Written off receivables journal entry
allowance for doubtfull account            Dr                   $   37000
account recevable                                         Cr                       $ 37000
Out of 37000 only 13500 were collect remaing 23500 was uncollectable during year.
Account recevable is in asset side of balance sheet
Accounts Receivable:
Total	650000
Less : reserve for doubtful accounts	-23500
Net receivables	626500