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Lisa [10]
2 years ago
13

Pincus Associates uses the allowance method to account for bad debts. During 2021, its first year of operations, Pincus provided

a total of $119,000 of services on account. In 2021, the company wrote off uncollectible accounts of $4,800. By the end of 2021, cash collections on accounts receivable totaled $100,800. Pincus estimates that 5% of the accounts receivable balance at 12/31/2021 will prove uncollectible.
Required:
a. What journal entry did Pincus record to write off uncollectible accounts during 2021?
b. What journal entry should Pincus record to recognize bad debt expense for 2021?
Business
1 answer:
Luba_88 [7]2 years ago
4 0

Answer:

Pincus Associates

Journal Entries:

a. Debit Allowance for Uncollectibles $4,800

Credit Accounts Receivable $4,800

To write off uncollectible accounts.

b. Debit Bad Debts Expense $5,470

Credit Allowance for Uncollectibles $5,470

To record bad debts expense for the period.

Explanation:

a) Data and Calculations:

Services on account = $119,000

Uncollectibles written off = $4,800

Cash collections on accounts = $100,800

Accounts receivable balance = $13,400 ($119,000 - 4,800 - 100,800)

Estimated uncollectible allowance = 5% of accounts receivable balance

= $670 ($13,400 * 5%)

Analysis:

a. Allowance for Uncollectibles $4,800 Accounts Receivable $4,800

b. Bad Debts Expense $5,470 Allowance for Uncollectibles $5,470 ($4,800 + $670)

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Answer:

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Assets

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Merchandise Inventory $15,600  

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Land                                                                    $38,000

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(Buildings)  

Total Assets                                                        <u>$ 174,800</u>

<u></u>

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Accounts Payables                $18,000

Salaries Payable                    <u>$6,800 </u>

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Total Liabilities & Stockholder's Equity           <u>$174,800</u>

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Direct Materials                                                            $63,000

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Income Statement Under Absorption Method

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Variable Manufacturing Overheads                            $ 18,000

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