Question

On December 31, 2019, Mills Manufacturing Ltd. had a $173,000 balance in its Accounts Receivable and a $9,800 balance in its Allowance for Doubtful Accounts. During 2020, the company made total sales of $902,000, of which $218,000 were cash sales. By the end of the year, Mills had received payments of $598,000 from its customers on account. The company also wrote off as uncollectible $13,800 of its receivables when it learned that these customers had declared bankruptcy. The company was subsequently able to recover $4,700 from one of these customers. (Note that this amount is not included in the cash collections noted above.) Management estimates that bad debts expense will be 3% of its credit sales.

(a)

Prepare the journal entries to record all the 2020 transactions, including the adjustment for bad debts expense at year end. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
(To record sales)
(To record cash collected from customers)
(To write off accounts receivable)
(To reinstate an account that were previously written off)
(To record recovery of account that were previously written off)
(To recognize the bad debts expense)

Answer 1

	Account titles and explanations					Debit	Credit
	Accounts receivable					684,000
	cash					218,000
	sales						902,000
	Cash					598,000
	Accounts receivable						598,000
	Allowance for Doubtful accounts					13,800
	Accounts receivable						13,800
	Accounts receivable					4,700
	Allowance for Doubtful accounts						4,700
	Cash					4,700
	Accounts receivable						4,700
	Bad debts expense					20520
	Allowance for Doubtful accounts						20520
	(684,000*3%)