Question

At 12/31/16, ABC Company had the following balances:

                                                                                                                                               DebitCredit

Accounts Receivable$182,000

Allowance for Doubtful Accounts $16,500

               During 2017 the following transactions occurred:

Accounts receivable of $138,000 were collected, including accounts of $60,000 on which 2% of sales discounts was allowed. The company uses the gross method to record sales made on credit.

Several customers notified ABC of bankruptcy, and ABC wrote off the accounts in the amount of $17,500.

ABC received $5,300 in payment for an account previously written off.

At year end, management used the “balance sheet approach” and an analysis of aged accounts receivable and estimated that uncollectible receivables totaled $20,000.

        Using the attached T-account template, prepare the entries to recognize the above economic events.

Answer 1

Accounts Receivable
Beg. Bal.	182000	Collections	138000
Re-instate accounts written-off	5300	Write-off	17500
		Collection against previos write-off	5300
End. Bal.	26500
Allowance for Doubtful Accounts
Write-off	17500	Beg. Bal.	16500
		Re-instate accounts written-off	5300
		Bad debt expense	15700
		End. Bal.	20000
Bad Debt Expense
Allowance for doubtful accounts	15700
End. Bal.	15700

Note: Since the template has not been provided with the question a generic T-account has been used toshow the three accounts that would be affected due to the given transactions.

Note: No credit sales have been given for 2017 in the question due to which there is no additional debit to the accounts receivable account. This results in an allowance account balance of $20000 against an account receivable balance of $26500 which seems misleading. Please re-confirm on the same prior to submission.