Question

At the end of 2016, blossom company has accounts receivable of $691,500 and an allowance for doubtful accounts of $25,740. 1. on january 24, 2017, it is learned that the company's receivable from madonna inc. is not collectible and therefore management authorizes a write-off of $3,943. 2. on march 4, 2017, blossom company receives payment of $3,943 in full from madonna inc.

Answer 1

Answer:

1. JOURNAL ENTRIES

Dr. Allowance for Doubtful Debts

Cr. Accounts receivable

Being bad debts written-off

2. JOURNAL ENTRIES

Dr. Cash

Cr. Bad debts recovered

Being bad debts written off, now recovered.

Explanation:

At the end of 2016, blossom company has accounts receivable of $691,500 and an allowance for doubtful accounts of $25,740.

1. If on January 24, 2017, it is learned that the company's receivable from Madonna inc. is not collectible and therefore management authorizes a write-off of $3,943.

JOURNAL ENTRIES

Dr. Allowance for Doubtful Debts

Cr. Accounts receivable

Being bad debts written off

2. on march 4, 2017, blossom company receives payment of $3,943 in full from Madonna inc.

JOURNAL ENTRIES

Dr. Cash

Cr. Bad debts recovered

Being bad debts written off, now recovered.

Answer 2

Answer:

January 24, 2017, write-off of Madonna Inc.'s debt

Dr Allowance for doubtful accounts 3,943

    Cr Accounts receivable 3,943

Since the allowance for doubtful accounts already included Madonna's account as bad debt expense, no further expense should be reported.

March 4, 2017, reversion of Madonna Inc.'s bad debt write-off

Dr Accounts receivable 3,943

    Cr Bad debt expense 3,943

March 4, 2017, Madonna Inc.'s debt is collected

Dr Cash 3,943

    Cr Accounts receivable 3,943

Two separate journal entries must be made since first we must reverse the previous write-off, and then we must record the cash collection.