Question

During 2021, its first year of operations, Pave Construction provides services on account of $144,000. By the end of 2021, cash collections on these accounts total $102,000. Pave estimates that 20% of the uncollected accounts will be uncollectible. In 2022, the company writes off uncollectible accounts of $7,560.

Required:

1. Record the adjusting entry for uncollectible accounts on December 31, 2021.

2-a. Record the write-off of accounts receivable in 2022.

2-b. Calculate the balance of Allowance for Uncollectible Accounts at the end of 2022 (before adjustment in 2022).

3-a. Assume the same facts as above but assume actual write-offs in 2022 were $11,340. Record the write-off of accounts receivable in 2022.

3-b. Assume the same facts as above but assume actual write-offs in 2022 were $11,340. Calculate the balance of Allowance for Uncollectible Accounts at the end of 2022 (before adjustment in 2022).

Answer 1

1) Adjusting entry

Date	account and explanation	Debit	Credit
Dec 31,2021	bad debt expense (42000*20%)	8400
	Allowance for doubtful accounts		8400
	(To record bad debt expense)

2a) Journal entry

Date	account and explanation	Debit	Credit
2022	Allowance for doubtful accounts	7560
	Account receivable		7560
	(To record write off)

2b) Balance in allowance for doubtful accounts = 8400-7560 = 840

3a) Journal entry

Date	account and explanation	Debit	Credit
2022	Allowance for doubtful accounts	11340
	Account receivable		11340
	(To record write off)

3b) Balance in allowance for doubtful accounts = 8400-11340 = 2940 Debit balance