At December 31 of the current year, a company reported the following: Total sale

Question

At December 31 of the current year, a company reported the following: Total sales for the current year: $5,320,000. Accounts receivable balance at Dec. 31, end of the current year: $450,000 Allowance for Doubtful Accounts balance at Dec. 31: 600 credit Prepare the necessary adjusting entries to record bad debts expense company's bad debts are estimated to equal: 2.5% of credit sales. 8% of accounts receivable. Prepare the necessary entry to write off J. Mohr's A/R balance. Prepare the necessary entries to record the recovery of J. Mohr's A/R balance when he pays the company at later date.

Explanation / Answer

Part 1a

2.5% of sales of 5,320,000 = $133,000

Bad debts account debit     133,000

        To accounts receivables                                  133,000

(For bad debts amounting to 5% of sales written off)

Part 1b)

8% of accounts receivables = 8% * 450,000 = 36,000

Bad debts account debit     36,000

        To accounts receivables                                  36,000

(For bad debts amounting to 8% of AR written off)

Part 2

Bad debts account debit     8,000

        To John Mohr account              8,000

(For 8,000 written from J Mohr account)

Part3

Cash account debit                     8,000

     To bad debts recovered                   8,000

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