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27 August, 15:04

g:At year-end (December 31), Chan Company estimates its bad debts as 0.20% of its annual credit sales of $650,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $325 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 Chan's journal entries for the transactions.

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  1. 27 August, 16:34
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    The journal entries are shown below:

    On December 31

    Bad debt expense Dr $130,000 ($650,000 * 0.20%)

    To Allowance for doubtful debts $130,000

    (Being the bad debt expense is recorded)

    On Feb 01

    Allowance for doubtful debts Dr $325

    To Account receivable $325

    (Being the written off amount is recorded)

    On June 5

    Account receivable $325

    To Allowance for doubtful debts Dr $325

    (Being the written off amount is recorded)

    On June 5

    Cash Dr $325

    To Account receivable $325

    (Being the cash received is recorded)
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