Question

On January 1, Wei company begins the accounting period with a $34,000 credit balance in Allowance for Doubtful Accounts. On February 1, the company determined that $7,600 in customer accounts was uncollectible; specifically, $1,300 for Oakley Co. and $6,300 for Brookes Co.
a. Prepare the journal entry to write off those two accounts. On June 5, the company unexpectedly received a $1,300 payment on a customer account, Oakley Company, that had previously been written off in part
b. Prepare the entries to reinstate the account and record the cash received.

Answer 1

Answer:

a. Debit Allowance for doubtful debt $1,300

   Debit Allowance for doubtful debt $6,300

   Credit Accounts receivable $7,600

Being entries to write off debts from Oakley Co. and Brookes Co.

b. Debit Accounts receivable $1,300

   Credit Allowance for doubtful debt $1,300

   Debit Allowance for doubtful debt $1,300

   Credit Bad debt expense $1,300

   Being entries to reinstate account receivable due from Oakley Co.

   Debit Cash account $1,300

   Credit Accounts receivable  $1,300

   Being entries to record cash received

Explanation:

When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.  

To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

Where a debit that had previously been determined to have gone bad gets settled, debit cash and credit bad debt expense.