Question

On December 31, 2021, when its Allowance for Doubtful Accounts had a debit balance of $1,529, Metlock, Inc. estimates that 7% of its accounts receivable balance of $77,800 will become uncollectible and records the necessary adjustment to Allowance for Doubtful Accounts. On May 11, 2022, Metlock, Inc. determined that B. Jared’s account was uncollectible and wrote off $1,168. On June 12, 2022, Jared paid the amount previously written off. Prepare the journal entries on December 31, 2021, May 11, 2022, and June 12, 2022. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Answer 1

Answer:

December 31, 2021

Debit Bad debt expense  $5,446

Credit Allowance for doubtful debt  $5,446

Being entries to account for receivable that may be incollectible.

May 11, 2022,

Debit Allowance for doubtful debt  $1,168

Credit Accounts Receivable  $1,168

Being entries that write off receivables due from Jared.

June 12, 2022

Debit Bank/Cash account  $1,168

Credit Bad debt account  $1,168

Being entries to recognize receivable settled that was previously written off.

Explanation:

When a company makes sales on account/credit, the required entries are debit accounts receivable credit revenue account. On the receipt of cash, credit accounts receivables and debit cash.

However, where the receivable are assessed and the conclusion reached is that they may be incollectible, debit bad debts expense and credit allowance for doubtful debts.

Should the receivables go bad, debit allowance for doubtful debt and credit accounts receivable.

So on December 31, 2021, amount of receivables that may be incollectible

= 7% * $77,800

= $5,446

Entries required are

Debit Bad debt expense  $5,446

Credit Allowance for doubtful debt  $5,446

Being entries to account for receivable that may be incollectible.

On May 11, 2022, Metlock, Inc. determined that B. Jared’s account was uncollectible and wrote off $1,168

To write it off,

Debit Allowance for doubtful debt  $1,168

Credit Accounts Receivable  $1,168

Being entries that write off receivables due from Jared.

On June 12, 2022, Jared paid the amount previously written off

Since the amount had been completely written off the accounts receivable, the entries required are

Debit Bank/Cash account  $1,168

Credit Bad debt account  $1,168

Being entries to recognize receivable settled that was previously written off.

Answer 2

Journal entries on December 31, 2021, May 11, 2022, and June 12, 2022

December 31, 2021

Dr Bad Debt Expense 6,975

Cr Allowance for Doubtful Accounts (7% X $77,800) + $1,529) 6,975

May 11, 2022

Dr Allowance for Doubtful 1,168

Cr Accounts receivable 1,168

June 12, 2022

Dr Accounts Receivable 1,168

Cr Allowance for Doubt Accounts 1,168

Dr Cash 1,168

Cr Account Receivable 1,168