Question

# The ledger of Costello Company at the end of the current year shows Accounts Receivable \$130,000,...

 The ledger of Costello Company at the end of the current year shows Accounts Receivable \$130,000, Sales Revenue \$849,000, and Sales Returns and Allowances \$27,000. There is a credit balance in Allowance for doubtful accounts of \$6,500. Costello uses the % of sales method for allowance for bad debts. Costello will be using 2% of net sales for their adjustment this year. Record the entry for the allowance at year end Account Debit Credit In February, a receivable in the amount of \$2,500 is deemed uncollectible and needs to be written off. Below record the journal entry Account Debit Credit Much to everyone's surprise, you receive a check in May paying for the written off invoice. Below record the journal entry hint: this is 2 entries Account Debit Credit The ledger of Costello Company at the end of the current year shows Accounts Receivable \$130,000, Sales Revenue \$849,000, and Sales Returns and Allowances \$27,000. There is a credit balance in Allowance for doubtful accounts of \$6,500. Costello uses the % of sales method for allowance for bad debts. Costello will be using 2% of net sales for their adjustment this year. Record the entry for the allowance at year end Account Debit Credit In February, a receivable in the amount of \$2,500 is deemed uncollectible and needs to be written off. Below record the journal entry Account Debit Credit Much to everyone's surprise, you receive a check in May paying for the written off invoice. Below record the journal entry hint: this is 2 entries Account Debit Credit

Journal Entry for allowance at year end:

 Particulars Debit (\$) Credit(\$) Bad Debt Expense 16,440 Allowance for doubtful accounts 16,440 {2% of net sales = (849000 - 27000) * 2%}

Journal Entry for bad debts to be written off :

 Particulars Debit (\$) Credit(\$) Bad Debt Expense 2,500 Accounts Receivable 2,500

Journal Entries for Bad Debts Recovered:

 Sr. No. Particulars Debit (\$) Credit(\$) 1. Accounts Receivable 2,500 Bad Debt Expense 2,500 2. Cash 2,500 Accounts Receivable 2,500