Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2018, accounts...
Colorado Rocky Cookie Company offers credit terms to its
customers. At the end of 2018, accounts receivable totaled
$675,000. The allowance method is used to account for uncollectible
accounts. The allowance for uncollectible accounts had a credit
balance of $42,000 at the beginning of 2018 and $26,000 in
receivables were written off during the year as uncollectible.
Also, $2,200 in cash was received in December from a customer whose
account previously had been written off. The company estimates bad
debts by applying a percentage of 10% to accounts receivable at the
end of the year.
Required:
1. Prepare journal entries to record the
write-off of receivables, the collection of $2,200 for previously
written off receivables, and the year-end adjusting entry for bad
debt expense.
2. How would accounts receivable be shown in the
2018 year-end balance sheet?
Homework Answers
1) Journal entry
| Date | account and explanation | Debit | Credit |
| Allowance for doubtful accounts | 26000 | ||
| Account receivable | 26000 | ||
| (To record write off) | |||
| Account receivable | 2200 | ||
| Allowance for doubtful accounts | 2200 | ||
| (To record reinstated) | |||
| Cash | 2200 | ||
| Account receivable | 2200 | ||
| (To record collection) | |||
| Bad debt expense (67500-18200) | 49300 | ||
| Allowance for doubtful accounts | 49300 | ||
| (To record adjusting entry) |
2) Balance sheet presentation
| Current assets | ||
| Account receivable | 675000 | |
| Less: Allowance for doubtful accounts | -67500 | 607500 |
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Requirement 1, Journal Entries:
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3) record collection if account previously written off
4) record bad debt expense for the year
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1) Record the write-off of receivables.
2) Record the reinstatement of an account previously written
off.
3) Record collection of account previously written off.
4) Record bad debt expense for the year.
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