At year-end (December 31), Chan Company estimates its bad debts as 0.60% of its annual credit sales of $779,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $390 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 the journal entries for these transactions.

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Business

Ari Marquez

9 September, 10:38

At year-end (December 31), Chan Company estimates its bad debts as 0.60% of its annual credit sales of $779,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $390 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 the journal entries for these transactions.

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Derrick · Answer 1

The journal entries are as follows

1. Bad debt expense A/c Dr $4,674 ($779,000 * 0.60%)

To Allowance for doubtful debts $4,674

(Being bad debt expense is recorded)

2. Allowance for doubtful debts Dr $390

To Account receivable $390

(Being the written off amount is recorded)

3. Account receivable $390

To Allowance for doubtful debts $390

4. Cash Dr $390

To Account receivable $390

(Being the cash received is recorded)