Question

Journalize and post the following transactions, assuming the allowance method of accounting for uncollectible accounts is used. adjusting entry: $18,000 of the year's A/R may become uncollectible closing entry: Bad Debts Expense account closed to Income Summary, which is subsequently closed to Capital-Do NOT journalize these entries, but post them in the accounts below Si any Spa's account of $5.000 is determined to be uncollectible Sunny Spa pays $5,000 to recover its credit rating 12/31 12/31 8/15 12/20 Credit Date Debit Explanation 12/31 Bad Delots Exp. 16,000 16,000 ADA 8/15 ADA AIR 12/20 A/R ADA Kash A/R S000 Allowance for Accounts Receivable Sunny Spa Doubtful Accounts Cash 5,000 5,000 2,000 tha000 16,000 10,000 15,000 5,000 5,00O Bad Debts Expense Income Summary Capital 16,000 16,00 16,000 I4000 42,000

I'm a little confused on the posting to accounts part. Specifically the Capital account and Allowance for Doubtful Accounts. I put ADA to abbreviate

Answer 1

Date	Explanation	Debit	Credit
15-Aug	Bad debt A/c                                       Dr.	$5000
	To A/R Sunny Spa's A/C		$5000
	(Being bad debt recognized)
20-Dec	Cash A/c                                              Dr.	$5000
	To bad debts recovered A/c		$5000
	(Being amount recovered in cash)
31-Dec	Profit & Loss A/c                              Dr.	$18000
	To Allowance for Doubtful debts A/c		$18000
	(Being provision created in books)

Cash A/C
To opening Bal	10,000
To bad debts recovered A/c	5000	By closing balance	15000
Total	15000	Total	15000
Account receivable sunny spa
To opening Bal	5,000	By bad debts	5000
Total	5000	Total	5000
Allowances for doubtful debt
		By opening Bal	2000
To Closing Balance	20,000	By P/L	18000
Total	20,000	Total	20000
Capital A/c
To net loss	18,000	By opening Bal	42000
To Closing Balance	24,000
Total	42,000	Total	42000
P/L or Income summary
To Allowances for doubtful debt	18,000	To bad debts recovered	5000
To Bad debt expense	5,000	By net loss	18000
Total	18,000	Total	18000
Bad debt expense
To Account receivable sunny spa	5,000
		By P/L	5000
Total	5,000	Total	5000