Question

#1. ALLOWANCE METHOD

The balance sheet of Starsky Company at December 31, 2019, includes the following:

Accounts receivable $ 182,100

Less: Allowance for doubtful accounts 17,300

= $164,800

Transactions in 2020 include the following:

1. Accounts receivable of $78,000 were collected

2. Accounts receivable of $60,000 were collected, in which 2% sales discounts were granted.

3. A $5,300 customer account that was written off the books as worthless in 2019 was reinstated.

4. The $5,300 was received from the customer.

5. Customer accounts of $17,500 were written off during the year.

6. At year-end, Allowance for Doubtful Accounts was estimated to need a balance of $20,000. This estimate is based on an analysis of aged accounts receivable.

Instructions: Journalize the above transactions.

Answer 1

Event	Account	Debit	Credit
1	Cash	$78000
	Accounts Receivable		$78000
	(To record collection)
2	Cash	$58800
	Sales Discount	$    1200
	Accounts Receivable		$60000
3	Accounts Receivable	$    5300
	Allowance for doubtful accounts		$    5300
	(To record reinstatement of written off accounts)
4	Cash	$    5300
	Accounts Receivbale		$    5300
	(To record collection against written off accounts)
5	Allowance for doubtful accounts	$ 17500
	Accounts Receivbale		$ 17500
	(To record accounts written off)
6	Bad Debt Expense	$ 14900
	Allowance for doubtful accounts		$ 14900
	(To record bad debt expense)
	Beginning Allowance Balance		$ 17300
	Add: Reinstatement of already written off accounts		$    5300
	Less: Accounts written off during the year		$ -17500
	Unadjusted ending balance		$    5100
	Less: Adjusted ending balance		$ 20000
	Bad Debt Expense To be recorded		$ 14900