The Brown Company sells small office equipment and fixtures on credit. Their end

Question

The Brown Company sells small office equipment and fixtures on credit.  Their ending balance in Accounts Receivable for 2012 was $120,000.  It was expected that $5,000 of this balance would later prove to be uncollectible, so Brown set up an Allowance for Doubtful Accounts for $5,000, and declared $5,000 as Bad Debts Expense for 2012.  In June of 2013, Brown determined that a $1,285 receivable owed by Molly Quinn should be written off.  Discuss the impact that this June write off action will have on Brown's Net Income for 2012 and 2013, and explain your answer.

Explanation / Answer

Answer:

In 2012 Co. has written off $5000 as bad debts expense and has created a Allowances for doubtful debts $5000. Now in June 2013 it has written off $1285 receivables the journal entry for this would be :

June 2013:

Allowances for doubtful debts Debit $1285

Accounts Receivables Credit $1285

(being receivables written off)

It means there shall be no impact on Net income for 2013 due to June written off.

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