BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Allowance method

Journalize the following transactions, using the allowance method of accounting for uncollectible receivables:

Apr. 15. Received $800 from jean Tooley and wrote off the remainder owed of $1,200 as uncollectible.
Aug. 7. Reinstated the account of Jean Tooley and received $1,200 cash in full payment.

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period.

Accounts receivable:

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Write-off:

Write-off refers to deduction of a certain amount from accounts receivable, when it becomes uncollectible.

To journalize: the given transactions, using allowance method of accounting for uncollectible accounts.

Explanation

Prepare the journal entry to record the collection of cash and write-off of uncollectible accounts, under direct allowance method.

Date Particulars Debit Credit
April 15 Cash $800  
  Allowance for doubtful accounts $1,200  
       Account receivable – Person JT   $2,000
  (To record cash collection and write-off of uncollectible account receivable )    

Table (1)

To record the collection of cash on account, cash account must be increased and accounts receivable must be decreased by $800.

To record this write-off of uncollectible receivables under allowance method, both allowance for doubtful accounts and accounts receivable must be decreased by $1,200. Hence,

  • Increase in cash (asset account) is debited with $800
  • Decrease in Allowance for doubtful accounts (contra-asset accounts) is debited with $1,200, and
  • Decrease in accounts receivable (asset account) is credited with ($800+$1,200) $2,000.

Reinstate the account of Person JT and record the collection of cash on account

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is the purpose of the strategic IT plan?

Accounting Information Systems

Identify the three payroll records usually needed by an employer.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

What is a eurodollar? If a French citizen deposits 10,000 in Chase Manhattan Bank in New York have eurodollars ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)