Answer :
Answer:
- (a) Prepare the entries to record sales and collections during the period.
Dr Accounts Receivable $ 800,000
Cr Sales $ 800,000
Dr Cash $ 763,000
Cr Accounts Receivable $ 763,000
- (b) Prepare the entry to record the write-off of uncollectible accounts during the period
Dr Allowance for Uncollectible Accounts $ 7,300
Cr Accounts Receivable $ 7,300
- (c) Prepare the entries to record the recovery of the uncollectible account during the period.
Dr Accounts Receivable $ 3,100
Cr Allowance for Uncollectible Accounts $ 3,100
Dr Cash $ 3,100
Cr Accounts Receivable $ 3,100
- (d) Prepare the entry to record bad debt expense for the period.
Dr Bad Debt Expense $ 20,200
Cr Allowance for Uncollectible Accounts $ 20,200
Explanation:
- Initial Balance
Dr Accounts Receivable $ 200.000
Cr Allowance for Uncollectible Accounts $ 9.000
- During the period, it had net credit sales of $800,000
Dr Accounts Receivable $ 800.000
Cr Sales $ 800.000
- Collections of $763,000
Dr Cash $ 763.000
Cr Accounts Receivable $ 763.000
- It wrote off as uncollectible accounts
Dr Allowance for Uncollectible Accounts $ 7.300
Cr Accounts Receivable $ 7.300
- A $3,100 account previously written off as uncollectible was recovered
Dr Accounts Receivable $ 3.100
Cr Allowance for Uncollectible Accounts $ 3.100
Dr Cash $ 3.100
Cr Accounts Receivable $ 3.100
- Assuming 5% of accounts receivable, the journal entry:
Dr Bad Debt Expense $ 20.200
Cr Allowance for Uncollectible Accounts $ 20.200
- FINAL Balance
Dr Accounts Receivable $ 229.700
Cr Allowance for Uncollectible Accounts $ 25.000
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 necessar 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.
The Journal entries to record sales, collections, write-off, recovered account, and Bad Debts Expense, in the books of Griffey Corp., for the period are as follows:
a) Debit Accounts Receivable $800,000
Credit Sales Revenue $800,000
To record credit sales.
Debit Cash $763,000
Credit Accounts Receivable $763,000
To record cash collections.
b) Debit Allowance for Uncollectible Accounts $7,300
Credit Accounts Receivable $7,300
To record accounts written off.
c) Debit Accounts Receivable $3,100
Credit Allowance for Uncollectible Accounts $3,100
To reverse an account recovered.
Debit Cash $3,100
Credit Accounts Receivable $3,100
To record cash collection on recovered account.
d) Debit Bad Debts Expenses $20,200
Credit Allowance for Uncollectible Accounts $20,200
To record bad debts expense.
Data Analysis:
Beginning balances:
Accounts Receivable = $200,000
Allowance for Uncollectible Accounts = $9,000 (credit)
Net credit sales = $800,000
Cash collections = $763,000
Uncollectibles written off = $7,300
Recovered account = $3,100
Uncollectible accounts ending balance = $25,000
Accounts Receivable
Account Titles Debit Credit
Beginning balance $200,000
Credit sales 800,000
Cash $763,000
Allowance for Uncollectible 7,300
Allowance for Uncollectible 3,100
Cash 3,100
Allowance for Uncollectible Accounts
Account Titles Debit Credit
Beginning balance $9,000
Accounts Receivable $7,300
Accounts Receivable 3,100
Bad Debts Expense $20,200
Ending balance $25,000
Totals $32,300 $32,300
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