Pincus Associates uses the allowance method to account for bad debts. During 2021, its first year of operations, Pincus provided a total of $126,000 of services on account. In 2021, the company wrote off uncollectible accounts of $5,100. By the end of 2021, cash collections on accounts receivable totaled $107,100. Pincus estimates that 10% of the accounts receivable balance at 12/31/2021 will prove uncollectible.

What journal entry did Pincus record to write off uncollectible accounts during 2021 and to recognize bad debt expense for 2021?

Question

Business

Arthur Vargas

10 August, 18:54

Pincus Associates uses the allowance method to account for bad debts. During 2021, its first year of operations, Pincus provided a total of $126,000 of services on account. In 2021, the company wrote off uncollectible accounts of $5,100. By the end of 2021, cash collections on accounts receivable totaled $107,100. Pincus estimates that 10% of the accounts receivable balance at 12/31/2021 will prove uncollectible.

What journal entry did Pincus record to write off uncollectible accounts during 2021 and to recognize bad debt expense for 2021?

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Answers (1)

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Janelle Rojas · Answer 1

Journal entries

Explanation:

The journal entries are shown below:

1. Allowance for doubtful accounts Dr $5,100

To Accounts Receivable $5,100

(Being the written off uncollected amount is recorded)

2. Bad debts expense $18,900

Allowance for Doubtful Accounts $18,900

(Being the bad debt expense is recorded)

The computation of is shown below:

= Ending balance of account receivable * estimated percentage

where,

Ending balance is

= Services on Account - Amount Written Off - Collection of accounts receivables

= $126,000 - $5,100 - $107,100

= $13,800

Now the bad debt expense is

= $13,800 + $5,100

= $18,900