a) Apple Co. is preparing 2019 financial statements. During 2019. Apple made $2,500,000 credit sales. Its accounts receivable and allowance for doubtful accounts balances on December 31, 2019 are as follows:
Accounts receivable 360,000 (Debit)
Allowance for doubtful accounts 3,500 (Debit)
Management estimates that 5% of accounts receivable will be uncollectible.
Please prepare the adjusting journal entry to record bad debt expense for 2019.
b) On February 15th, 2020, Lucky Store, one of its customers, filed bankruptcy and the Apple co. management determines that its unpaid accounts receivable $3,500 should be written off.
Please prepare the journal entry for write-off
c ) On April 1, Lucky informed that a new investor injected cash to the company and it is paying back $3,500.
Please prepare the journal entry for the receipt of $3,500.
Solution:-
Date | Particulars | Debit ($) | Credit ($) |
Dec 31 2019 | Uncollectible Accounts Dr. | 18,000 | |
To Allowance for doubtful accounts | 18,000 | ||
For allowance for doubtful accounts created | |||
Feb 15 2020 | Allowance for doubtful accounts Dr. | 3,500 | |
To Account Receivable A/c | 3,500 | ||
(For bad debts written off against allowance) | |||
April1 2020 | Cash A/c Dr. | 3,500 | |
To Bad debts recovered A/c | 3,500 | ||
(For receipt of amount from previously declared bad debts) | |||
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