Question

At year-end (December 31), Chan Company estimates its bad debts as 1.00% of its annual credit sales of $794,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $397 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.
Prepare the journal entries for these transactions.1. Record the estimated bad debts expense.2. Record the entry to write off P. Park's account as uncollectible.3. Record the reinstatement of Park's previously written off account.4. Record the cash received on account.

Answer 1

Answer:

1. bad debt expense debit 7940

allowance for bad debt credit 7940

2. allowance for bad debt debit 397

account receivable credit 397

3. account receivable debit 397

allowance for bad credit 397

4. cash debit 397

account receivable credit 397

Explanation:

the allowance will be the 1% of 794,000

then recognize the allowance for that ammount along with the bad debt expense

total write-off an account we decrease both, the allowance and account receivable

total reinstate the Parks account we do the previous entry backwards

lastly we post like any other collection from Account Receivable