Answer:
The amount of uncollectible accounts expense recognized on the 2011 income statement is:
$6,600.
Explanation:
As the amount of uncollectible accounts are expressed as percentage of the total sales, then the amount is $6,600
Dr Accounts Receivable $ 13.000
During 2011, Grace provided $55,000 of service on account
Dr Accounts Receivable $ 55.000
Cr SALES $ 55.000
- The company collected $48,100 cash from account receivable.
Dr CASH $ 48.100
Cr Accounts Receivable $ 48.100
- Uncollectible accounts are estimated to be 12% of sales on account
Dr Bad Debt Expense $ 6.600
Cr Allowance for Uncollectible Accounts $ 6.600
If the company applies the allowance method, it means that the account Allowance for Uncollectible Accounts must show as balance the % 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.
