Question

Johnson Company calculates its allowance for uncollectible accounts as 5% of its ending balance in gross accounts receivable. The allowance for uncollectible accounts had a credit balance of $12,000 at the beginning of 2021. No previously written-off accounts receivable were reinstated during 2021. At 12/31/2021, gross accounts receivable totaled $200,100, and prior to recording the adjusting entry to recognize bad debts expense for 2021, the allowance for uncollectible accounts had a debit balance of 22,000.

Required:
1. What was the balance in gross accounts receivable as of 12/31/2020?
2. What journal entry should Johnson record to recognize bad debt expense for 2021?
3. Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2021. Determine the amount of accounts receivable written off during 2021.
4. If Johnson instead used the direct write-off method, what would bad debt expense be for 2021?

Answer 1

1.

allowance account at the beginning of 2021.	12000
Divided by: % of ending accounts receivable	5%
balance in gross accounts receivable as of 12/31/2020	240000

2.

Date	General Journal	Debit	Credit
31-Dec-21	Bad debt expense (200100*5% + 22000)	32005
	Allowance for uncollectible accounts		32005

3.

Allowance account at the beginning of 2021.	12000
Less: Unadjusted Allowance account at the end	-22000
Accounts receivable written off	34000

4.

If Direct method:
bad debt expense be for 2021	34000