Question

Alpha Company uses an allowance method for recording bad debts. On July 15, 2016 Alpha Company was advised of the bankruptcy of the Broken Corporation and wrote off their $7,000 of accounts receivable. Suddenly, on August 25, 2016 Broken won the Maryland State Mega Millions. Without warning, on August 26, Alpha Company received in full the payment for Broken's past debt. Use this information to prepare the General Journal entries (without explanation) for the August 26, 2016 event. If no entry is required then write "No Entry Required."

Answer 1

Explanation:

The journal entries are shown below:

On August 26, 2016

Account receivable A/c Dr $7,000

             To Allowance for doubtful accounts A/c $7,000

(Being the account receivable is written off)

Cash A/c Dr $7,000

        To Account receivable A/c $7,000

(Being the cash received is recorded)

Only these two entries are recorded on August 26, 2016 which are shown above