Question

Assume the following information for Larkspur Corp. Accounts receivable (beginning balance) $145,000 Allowance for doubtful accounts (beginning balance) 11,480 Net credit sales 944,000 Collections 901,000 Write-offs of accounts receivable 6,300 Collections of accounts previously written off 2,200 Uncollectible accounts are expected to be 9% of the ending balance in accounts receivable.

Answer 1

Answer: See the required journal entries below.

Explanation: See below steps to record the transactions that occurred during the period and recognize ultimately the bad debt expense.

Step 1: Recognize the transactions during the period

Debit Accounts receivables                      $944,000

Credit Sales revenue                                 $944,000

(To recognize the sales on account)

Debit Cash                                                  $901,000

Credit Accounts receivable                       $901,000

(To recognize sales collection)

Debit Allowance for doubtful account         $6,300

Credit Accounts receivable                          $6,300

(To recognize the write-off of accounts receivable)

Debit Cash                                                                                     $2,200

Credit Bad debt recovery (income statement/other income)    $2,200

(Collection of accounts receivable previously written off)

Step 2: Movement schedules of accounts receivable and allowance for doubtful accounts

Accounts receivable

Balance, beginning of the period               $145,000

Addition: Net credit sales                             944,000

Less: Collections                                           901,000

         Write-off                                                   6,300

Balance, end of the period                          $181,700

Allowance for doubtful accounts

Balance, beginning of the period                 $11,480

Less: Write-off                                                   6,300

Balance, end of the period (unadjusted)       $5,180

Step 3: Journals for bad debt expense

Debit Bad debt expense [(9% * $181,700) - $5,180]               $11,173

Credit Allowance for doubtful account                                   $11,173

(To record bad debt expense for the period)