Answer:
Feb 28.
- Uncollectible accounts expense would amount to 1% of net credit sales made during February.
Dr Bad Debt Expense $ 27,860
Cr Allowance for Uncollectible Accounts $ 27,860
- On March 10, an accounts receivable from Kathy Black for $6,100 was determined to be uncollectible and written off.
Dr Allowance for Uncollectible Accounts $ 6,100
Cr Accounts receivable $ 6,100
- March 31, Black received an inheritance and immediately paid her past due account in full.
Dr Accounts receivable $ 6,100
Cr Allowance for Uncollectible Accounts $ 6,100
Dr CASH $ 6,100
Cr Accounts receivable $ 6,100
Explanation:
February 28
Dr Accounts receivable $ 437.000
Cr Allowance for Uncollectible Accounts $ 2.140
Net Credit Sales February $ 3.000.000
Uncollectible accounts expense would amount to 1% of net credit sales made during February.
Dr Bad Debt Expense $ 27.860
Cr Allowance for Uncollectible Accounts $ 27.860
On March 10, an accounts receivable from Kathy Black for $6,100 was determined to be uncollectible and written off.
Dr Allowance for Uncollectible Accounts $ 6.100
Cr Accounts receivable $ 6.100
March 31, Black received an inheritance and immediately paid her past due account in full.
Dr Accounts receivable $ 6.100
Cr Allowance for Uncollectible Accounts $ 6.100
Dr CASH $ 6.100
Cr Accounts receivable $ 6.100
If the company applies the allowance method, it means that the account Allowance for Uncollectible Accounts must show as balance the % estimated of accounts receivables as CREDIT.
Bad accounts are those credits granted by the company and there is no possibility of being charged.
"When customers buy products on credits but the company cannot collect the debt, then it's necessary
to cancel the unpaid invoice as uncollectible."
One way is to directly cancel bad debts at the time it was decided that the credit is bad, the total amount reported as bad debt expenses negatively affect the income statement and the accounts receivable are reduced by the same amount, less assets
The other way is to determine a percentage of the total amount of accounts receivable as bad debts, there are many ways to analyze accounts receivable and calculate the value of bad debts.
When the company has the percentage of uncollectible accounts, the required journal entry is Bad Expenses (debit) with Reserve for Bad Accounts (credit)
At the time of cancellation, since the expenses were recognized before, we only use the Allowance for Uncollectible Accounts (Debit) with accounts receivable (credit), with this we are recognizing the bad credit of the company.
