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katen-ka-za [31]
3 years ago
8

Johnson Company calculates its allowance for uncollectible accounts as 10% of its ending balance in gross accounts receivable. T

he allowance for uncollectible accounts had a credit balance of $28,000 at the beginning of 2021. No previously written-off accounts receivable were reinstated during 2021. At 12/31/2021, gross accounts receivable totaled $466,700, and prior to recording the adjusting entry to recognize bad debts expense for 2021, the allowance for uncollectible accounts had a debit balance of 51,300. Required: 1. What was the balance in gross accounts receivable as of 12/31/2020? 2. What journal entry should Johnson record to recognize bad debt expense for 2021? 3. Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2021. Determine the amount of accounts receivable written off during 2021. 4. If Johnson instead used the direct write-off method, what wou
Business
1 answer:
Tju [1.3M]3 years ago
6 0

Answer:

1. What was the balance in gross accounts receivable as of 12/31/2020?

= allowance for doubtful accounts 2020 / 10% = $28,000 / 10% = $280,000

2. What journal entry should Johnson record to recognize bad debt expense for 2021?

Dr Bad debt expense (= 46,670 + 51,300) 97,970

    Cr Allowance for doubtful accounts 97,970

3. Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2021. Determine the amount of accounts receivable written off during 2021.

= credit balance allowance for doubtful accounts January 1 + debit balance allowance for doubtful accounts December 31 = $28,000 + $51,300 = $79,300

4. If Johnson instead used the direct write-off method, what would the bad debt expense be

The bad debt expense would equal $79,300. The allowance for doubtful accounts is used as an estimate of future bad debt expense, while the direct write off method directly writes off bad debt as they occur.

Explanation:

beginning balance of allowance for doubtful accounts $28,000

gross accounts receivable $466,700 x 10% = $46,670 bad debt

before adjustments, the allowance for doubtful accounts had a debit balance of $51,300

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