Question

During 2021, its first year of operations, Pave Construction provides services on account of $160,000. By the end of 2021, cash collections on these accounts total $110,000. Pave estimates that 25% of the uncollected accounts will be uncollectible. In 2022, the company writes off uncollectible accounts of $10,000. Required:
1. Record the adjusting entry for uncollectible accounts on December 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

2-a. Record the write-off of accounts receivable in 2022. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)2-b. Calculate the balance of Allowance for Uncollectible Accounts at the end of 2022 (before adjustment in 2022).3-a. Assume the same facts as above but assume actual write-offs in 2022 were $15,000. Record the write-off of accounts receivable in 2022. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)3-b. Assume the same facts as above but assume actual write-offs in 2022 were $15,000. Calculate the balance of Allowance for Uncollectible Accounts at the end of 2022 (before adjustment in 2022).

Answer 1

Answer:

uncollectible amounts 12,500 debit

      allowance uncollectible amounts 12,500 credi

--to record allowance--

allowance uncollectible amounts 10,000 debit

     accoutns receivables                    10,000 credit

--to record write-off 2021--

Balance of the allowance accounts:

12,500 - 10,000 = 2,500

allowance uncollectible amounts 15,000 debit

     accoutns receivables                    15,000 credit

--to record write-off 2022--

Explanation:

sales         160,000

collection  110,000

AR              50,000

times 25% expected uncollectible amount: 12,500

The allowance method will not recognize additional uncollectible amount expense when doing a write-off it will only do it when the company does the adjusting entry considering their rates and agings of their accounts.