In: Accounting
At year-end (December 31), Chan Company estimates its bad debts
as 0.5% of its annual credit sales of $975,000. Chan records its
Bad Debts Expense for that estimate. On the following February 1,
Chan decides that the $580 account of P. Park is uncollectible and
writes it off as a bad debt. On June 5, Park unexpectedly pays the
amount previously written off.
Prepare the journal entries for these transactions.
Allowance for doubtful account is created to credit the amount estimated to be uncollectible
when the receivable is written off allowance for doubtful account is debited at that time again bad debt expense is not required to be recorded.
When the account receivable written off previously is received back the above entry is reversed and one more entry is passed to debit cash received.
we will journalize the above transactions
date | General journal | Debit | credit | |
Dec. 31 | Bad debt expense* | $4,875 | ||
allowance for doubtful account | $4,875 | |||
[To Record the estimated bad debts expense. ] | ||||
Feb 1 | Allowance for doubtful account | $580 | ||
Account receivable-P. park | $580 | |||
[ Write off P. Park's account as uncollectible ] | ||||
June 05 | Accounts receivable-P. Park | $580 | ||
Allowance for doubtful accounts | $580 | |||
[ Reinstated Park's previously written off account ] | ||||
June 05 | cash | $580 | ||
Accounts receivable-P.Park | $580 | |||
[ Record the cash received on account] | ||||
* bad debt expense = $975,000*0.5%
=$4,875