Question

At the beginning of March, Paragon Limited, which records adjusting entries at the end of each month, had an
Accounts Receivable amount of $30,000 and an Allowance for Doubtful Accounts balance of $5,000. During March, the
company had credit sales of $40,000 and collected $35,000 from customers. It also wrote off a certain amount of uncol-
lectible receivables during the month and recorded a certain amount of bad debts expense at the end of the month. No
accounts that were written off during the month were subsequently recovered. At the end of March, aft er all journal entries
had been recorded and posted, the balance in Accounts Receivable was $32,000 while Allowance for Doubtful Accounts
had a balance of $4,500.
Instructions
(a) Prepare T accounts for Accounts Receivable and Allowance for Doubtful Accounts. Post the above transactions and
determine the missing amounts for the write off of uncollectible receivables and bad debts expense.
(b) Prepare the journal entry that would have been made by the company to write off uncollectible receivables during
March.
(c) Prepare the journal entry that would be made by the company to record bad debts expense for the month of
March.

Answer 1

Please find the answer

	Accounts receivable
		Dr		Cr
	Particulars	Amount	Particulars	Amount
	Opening balance	30000	By cash	35000
	To sales	40000	Bad debts	500
			Bad debts	2500
			Closing balance	32000
		70000		70000
	Allowance for doubtful debts
		Dr		Cr
	Particulars	Amount	Particulars	Amount
	To bad debts	500	Opening balance	5000
	Closing balance	4500
		5000		5000
	Bad debts
		Dr		Cr
	Particulars	Amount	Particulars	Amount
	Opening balance	0	By cash	0
	To debtors	2500	By allowance for doubt ful debts	500
	To debtors	500	Charged to PL	2500
		3000		3000
	Journal entry
			Dr	Cr
During march	Bad debts		2500
	To Debtors			2500
March end	Bad debts		500
	To Debtors			500
March end	Allowance for doubtful debts		500
	To bad debts			500