Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2013, accounts receivable totaled $670,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $41,000 at the beginning of 2013 and $25,500 in receivables were written off during the year as uncollectible. Also, $2,100 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 15% to accounts receivable at the end of the year.

Prepare journal entries to record the write-off of receivables, the collection of $2,100 for previously written off receivables, and the year-end adjusting entry for bad debt expense.

Record the write-off of receivables.

Record the reinstatement of an account previously written off.

Record collection of account previously written off.

Record bad debt expense for the year.

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Business

Jackson

25 September, 07:25

Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2013, accounts receivable totaled $670,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $41,000 at the beginning of 2013 and $25,500 in receivables were written off during the year as uncollectible. Also, $2,100 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 15% to accounts receivable at the end of the year.

Prepare journal entries to record the write-off of receivables, the collection of $2,100 for previously written off receivables, and the year-end adjusting entry for bad debt expense.

Record the write-off of receivables.

Record the reinstatement of an account previously written off.

Record collection of account previously written off.

Record bad debt expense for the year.

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Answers (1)

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Miracle Richard · Answer 1

Journal entries

Explanation:

The journal entry are as follows

1. Allowance for doubtful debts $25,500

To Account receivable $25,500

(Being the written off amount is recorded)

2. Account receivable Dr $2,100

To Allowance for doubtful debts $2,100

(Being the reinstatement of an account previously written off is recorded)

3. Cash Dr $2,100

To Account receivable $2,100

(Being the collection of account is recorded)

4. Bad debt expense Dr $82,900

To Allowance for doubtful debts $82,900

(Being the bad debt expense is recorded)

It is computed below:

= $670,000 * 15% - ($41,000 + $25,500 + $2,100)

= $100,500 - $17,600

= $82,900

Only these entries are recorded