Question

Johnson Company starts the year with $300,000 in A/R and records $1,000,000 in net credit sales during the year, of which $700,000 are collected. Allowance for Doubtful Accounts has a beginning balance of $5,000. Write-offs are $5,000 during the year, and $1,000 of previously written off were subsequently collected. Johnson estimates that 5% of ending A/R will not be collected. (this will be the ending balance in A.D.A.)

Required:

1. Record journal entries for write-offs, collections of prior write-offs and bad debt expense.
2. Show your work calculations for Bad Debt Expense

Answer 1

Journal entries

Date	account and explanation	Debit	Credit
	Allowance for doubtful accounts	5000
	Account receivable		5000
	(To record write off)
	Account receivable	1000
	Allowance for doubtful accounts		1000
	(To record reinstate)
	Cash	1000
	Account receivable		1000
	(To record collection)
	Bad debt expense (595000*5%+1000)	30750
	Allowance for doubtful accounts		30750
	(To record bad debt expense)