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QS 7-5 (Algo) Allowance method for bad debts LO P2 Gomez Corp. uses the allowance method to account for uncollectibles. On January 31, it wrote off an $2,800 account of a customer, C. Green. On March 9, it receives a $2,300 payment from Green. 1. Prepare the journal entry for January 31. 2. Prepare the journal entries for March 9; assume no additional money is expected from Green.

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Answer:

1. Jan 31

Dr Allowance for doubtful accounts $2,800

Cr Accounts receivable—C. Green $2,800

2. Mar 09

Dr Accounts receivable—C. Green $2,300

Cr Allowance for doubtful accounts $2,300

3. Mar 09

Dr Cash $2,300

Cr Accounts receivable—C. Green $2,300

Explanation:

1. Preparation of the journal entry for January 31.

Jan 31

Dr Allowance for doubtful accounts $2,800

Cr Accounts receivable—C. Green $2,800

2. Preparation of the journal entry for March 9

Mar 09

Dr Accounts receivable—C. Green $2,300

Cr Allowance for doubtful accounts $2,300

3. Mar 09

Dr Cash $2,300

Cr Accounts receivable—C. Green $2,300

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