At the beginning of the current period, Larkspur Corp. had balances in Accounts Receivable of $202,700 and in Allowance for Doubtful Accounts of $9,200 (credit). During the period, it had net credit sales of $744,100 and collections of $829,950. It wrote off as uncollectible accounts receivable of $7,798. However, a $2,979 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $26,820 at the end of the period. (Omit cost of goods sold entries.) (a - d) (a) Prepare the entries to record sales and collections during the period. (b) Prepare the entry to record the write-off of uncollectible accounts during the period. (c) Prepare the entries to record the recovery of the uncollectible account during the period. (d) Prepare the entry to record bad debt expense for the period.

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Business

Levi

22 July, 22:27

At the beginning of the current period, Larkspur Corp. had balances in Accounts Receivable of $202,700 and in Allowance for Doubtful Accounts of $9,200 (credit). During the period, it had net credit sales of $744,100 and collections of $829,950. It wrote off as uncollectible accounts receivable of $7,798. However, a $2,979 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $26,820 at the end of the period. (Omit cost of goods sold entries.) (a - d) (a) Prepare the entries to record sales and collections during the period. (b) Prepare the entry to record the write-off of uncollectible accounts during the period. (c) Prepare the entries to record the recovery of the uncollectible account during the period. (d) Prepare the entry to record bad debt expense for the period.

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Andreas Martinez · Answer 1

a) Entries to record sales and collections during the period will include:

1) Debit Accounts Receivable with $744,100 and Credit Sales Account with $744,100.

2) Debit Cash Account with $829,950 and Credit Accounts Receivable with $829,950.

b) Entry to record the write-off of uncollectible accounts include:

1) Debit Bad Debts Account with $7,798 and Credit Accounts Receivable with $7,798.

c) Entries to record the recovery of the uncollectible account during the period will include:

1) Debit Cash Account with $2,979 and Credit Accounts Receivable with $2,979.

2) Debit Accounts Receivable with $2,979 and Credit Bad Debts Recovering Account with $2,979.

d) Entry to record bad debt expense for the period will include:

1) Debit Bad Debt Expense Account with the difference between $26,820, and $9,200. This equals $17,620. And credit the Allowance for Doubtful Account with $17,620.

Explanation:

a) Net Sales increase the Sales account and the Accounts Receivable with the same amount on the credit and debit sides respectively to complete the double entry.

b) Collections from customers will reduce the Accounts Receivable and increase the Cash balance.

c) Any bad debt deemed uncollectible is written off to Bad Debts Account while the Accounts Receivable is reduced by the same amount.

d) When a previously written-off uncollectible is recovered, the Cash balance increases and the Customer's Account reduces. In order to record the transaction properly, there is a reversal of the previously written-off uncollectible in the Accounts Receivable with a Bad Debt Recovery Account opened.

e) For Allowance for Doubtful Accounts, there is a comparison between the beginning balance and the closing balance or estimate to capture the increase or decrease.