Exercise 5-7B Establish an allowance for uncollectible accounts and write off accounts receivable (LO5-3, 5-4)
During Year 1, its first year of operations, a company provides services on account of $142,000. By the end of Year 1, cash collections on these accounts total $101,000. The company estimates that 25% of the uncollected accounts will be uncollectible. In Year 2, the company writes off uncollectible accounts of $9,225.
Required:
1. Record the adjusting entry for uncollectible accounts on December 31, Year 1. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
2-a. Record the write-off of accounts receivable
in Year 2. (If no entry is required for a particular
transaction/event, select "No Journal Entry Required" in the first
account field.)
2-b. Calculate the balance of Allowance for
Uncollectible Accounts at the end of Year 2 (before adjustment in
Year 2).
3-a. Assume the same facts as above but assume
actual write-offs in Year 2 were $14,760. Record the write-off of
accounts receivable in Year 2. (If no entry is required for
a particular transaction/event,
select "No Journal Entry Required" in the first account
field.)
3-b. Assume the same facts as above but assume
actual write-offs in Year 2 were $14,760. Calculate the balance of
Allowance for Uncollectible Accounts at the end of Year 2 (before
adjustment in Year 2).
1.
Date | Account title | Debit | Credit |
Dec 31, Year 1 | Baddebt expenses (($142,000-$101,000)*25%) | $ 10,250 | |
Allowance for doubtful accounts | $ 10,250 | ||
(To record baddebt expenses) |
2a.
Date | Account title | Debit | Credit |
Year 2 | Allowance for doubtful accounts | $ 9,225 | |
Accounts Receivable | $ 9,225 | ||
(To record write off ) |
2b.
Balance in allowance for uncollectible account ($10,250-$9,225) | $ 1,025 | Credit |
3a.
Date | Account title | Debit | Credit |
Year 2 | Allowance for doubtful accounts | $ 14,760 | |
Accounts Receivable | $ 14,760 | ||
(To record write off ) |
3b.
Balance in allowance for uncollectible account ($10,250-$14,760) | $ 4,510 | Debit |
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