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At year-end (December 31), Chan Company estimates its bad debts as 0.30% of its annual credit...

At year-end (December 31), Chan Company estimates its bad debts as 0.30% of its annual credit sales of $758,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $379 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 of Chan to record these transactions and events of December 31, February 1, and June 5.

Dec 31:

Feb 1:

June 5:

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Answer #1

Given that the Bad Debts are estimated at 0.30% of Credit Sales

Bad Debts Expense = $758000*0.30% =$2274

Journal Entries:

Date GEneral Journal Debit Credit
Dec 31 Bad Debts Expense $2274
Allowance foir Doubtful Account $2274
Date General Journal Debit Credit
February 1 Allowance for Doubtful Account $379
Accounts Receivable - P park $379
Date General Journal Dbit Credit
June 5 Accounts Receivable - P park $379
  Allowance for Doubtful Account $379
(To record Reinstatement of Account)
Cash $379
Account Receivable $379
(To record receipt of Cash)
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