The percentage of receivables approach to estimating bad debts expense is used b

Question

The percentage of receivables approach to estimating bad debts expense is used by Hayes Company. On February 28, the firm had accounts receivable in the amount of $585,000 and Allowance for Doubtful Accounts had a credit balance of $370 before adjustment. Net credit sales for February amounted to $3,000,000. The credit manager estimated that uncollectible accounts would amount to 5% of accounts receivable. On March 10, an accounts receivable from Mark Dole for $2,100 was determined to be uncollectible and written off. However, on March 31, Dole received an inheritance and immediately paid his past due account in full.

The percentage of receivables approach to estimating bad debts expense is used by Hayes Company. On February 28, the firm had accounts receivable in the amount of $585,000 and Allowance for Doubtful Accounts had a credit balance of $370 before adjustment. Net credit sales for February amounted to $3,000,000. The credit manager estimated that uncollectible accounts would amount to 5% of accounts receivable. On March 10, an accounts receivable from Mark Dole for $2,100 was determined to be uncollectible and written off. However, on March 31, Dole received an inheritance and immediately paid his past due account in full.

Explanation / Answer

Answer:- Journal entries for the below dares are as follows:-

Bad debts Expense (585000 × 0.05)-370

Allowance for doubtful Account

(To record the bad debts expense for fees)

29005

29005

Allowance for Doubtful Account

Accounts Receivable - M. Dole

(To write off M. Dole. Account deemed uncollectible)

2100

Accounts Receivable - M. Dole

Allowance for Doubtful Account

(To reinstate an account previously written off)

2100

Cash

Account Receivable - M. Dole

(To record payment on account in full)

2100

Date Particulars Debit Credit Feb 28

Bad debts Expense (585000 × 0.05)-370

Allowance for doubtful Account

(To record the bad debts expense for fees)

29005

29005

March 10

Allowance for Doubtful Account

Accounts Receivable - M. Dole

(To write off M. Dole. Account deemed uncollectible)

2100

2100

March 31

Accounts Receivable - M. Dole

Allowance for Doubtful Account

(To reinstate an account previously written off)

2100

2100

March 31

Cash

Account Receivable - M. Dole

(To record payment on account in full)

2100

2100

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