Question

Unit 7 Assignment- Allowance method journal entries

Instructions

This assessment addresses the following course objective(s):

Apply the accounting vocabulary

Record various business transactions in accordance with generally accepted accounting principles.

In this assignment, we will learn how to prepare journal entries to write off an uncollectable account using the Allowance method.

At year-end (December 31), Kneller Company estimates its bad debts as 0.60% of its annual credit sales of $919,000. Kneller records its Bad Debts Expense for that estimate. On the following February 1, Kneller decides that the $460 account of M Monamy is uncollectible and writes it off as a bad debt. On June 5, Monamy unexpectedly pays the amount previously written off. Prepare the journal entries for these transactions. No Date General Journal Debit Credit

Answer 1

31 December Provision for bad debts A/c ..Dr 5514

To Debtors A/c 5514

(Being provision for bad debts created on $919000.00 @ 0.6%)

Bad debts A/c ..Dr 5514

    To Provisional for bad debts A/c   5514

(Being amount written off as bad debts)

Profit & Loss A/c ..Dr 5514

   To Bad debts A/c 5514

(Being Provision for bad debts trasnferred to Profit & Loss account )

1 Feb Bad debts A/c ..Dr 460

To M. Monamy A/c 460

(Being uncollectable amount written off)

Profit & Loss A/c ..Dr 460

To Bad debts A/c 460

( Being Bad debts transferred to profit & Loss

Account)

5 June Bank A/c ...Dr 460

To Bad debts Recovered A/c 460

(Being Bad debt written off earlier recovered)

Bad Debts Recovered A/c ..Dr 460

To Profit & Loss A/c 460

(Being bad debt recovered transferred to Profit & Loss A/c)