Exercise 9-6 Percent of sales method; write-off LO P3 At year-end (December 31), Chan Company estimates its bad debts as 1% of its annual credit sales of $487,500. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $580 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.

The journal entries are shown below:

On December 31:

Bad debt expense A/c Dr $4,875 ($487,500 * 1%)

To Allowance for Doubtful debts A/c $4,875

(Being bad debt expense is recorded)

On February 1:

Allowance for doubtful accounts A/c $580

To Accounts receivable A/c Dr $580

(Being the uncollectible amount is recorded)

On June 5:

Accounts receivable A/c Dr $580

To Allowance for doubtful accounts A/c $580

(Being allowance for doubtful accounts is recorded)

On June 5:

Cash A/c Dr $580

To Accounts receivable A/c Dr $580

(Being the amount received)

We assume the first entry is recorded on December 31