Question

Johnson Company calculates its allowance for uncollectible accounts as 5% of its ending balance in gross accounts receivable. The allowance for uncollectible accounts had a credit balance of $16,000 at the beginning of 2021. No previously written-off accounts receivable were reinstated during 2021. At 12/31/2021, gross accounts receivable totaled $266,800, and prior to recording the adjusting entry to recognize bad debts expense for 2021, the allowance for uncollectible accounts had a debit balance of 29,300. Required: 1. What was the balance in gross accounts receivable as of 12/31/2020? 2. What journal entry should Johnson record to recognize bad debt expense for 2021? 3. Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2021. Determine the amount of accounts receivable written off during 2021 4. If Johnson instead used the direct write-off method, what would bad debt expense be for 2021? Required 1 Required 2 Required 3 Required 4 What was the balance in gross accounts receivable as of 12/31/2020? Balance in gross accounts receivable

Answer 1

1. Gross Accounts Receivable as on 31.12.2020 ie begining of the FY 2021:

We know opening bal of Uncollectible Receivable is $ 16000 which is 5% of Gross Accounts Receivable. So, Accounts receivable = 16000/5*100 = $ 320 000.

2.

Bad debts a/c {Closing(266800*5%)+existing 29300}	42640
To Allowance for Uncollectible Receivables a/c		42640

3.

Gross Account Receivable	266800
Less: Allowance for uncollectible receivables (16000+29300)	45300
Account Receivable (net)	221500

4. Direct Method:

Bad debts (29300+16000)	45300
To Accounts Receivable a/c		45300