Question

At the beginning of the current period, Larkspur Corp. had balances in Accounts Receivable of $201,700 and in Allowance for Doubtful Accounts of $9,590 (credit). During the period, it had net credit sales of $875,700 and collections of $796,820. It wrote off as uncollectible accounts receivable of $7,410. However, a $2,808 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $25,830 at the end of the period. (Omit cost of goods sold entries.)
Required:
(a) Prepare the entries to record sales and collections during the period.
(b) Prepare the entry to record the write-off of uncollectible accounts during the period.
(c) Prepare the entries to record the recovery of the uncollectible account during the period.
(d) Prepare the entry to record bad debt expense for the period.

Answer 1

Solution and Explanation:

No.  Account                             debit  credit

a  Accounts receivable  875700  

Sales revenue                   875700

[to record credit sales]    

cash                        796820  

Accounts receivable               796820    

b  Allowance for doubtful account  7410  

Accounts receivable                        7410

[Account written off]        

c  Accounts receivable          2808  

Allowance for doubtful account   2808

[Accounts written off reinstated]        

cash                                      2808  

Accounts receivable                      2808    

d  Bad debt expense  20842  

Allowance for doubtful account   20842

[Bad debt expense recorded for the period]    

**Bad debt expense = estimated uncollectible account -Beginning+write off - reinstated accounts  

     $=25830-9590+7410-2808$

b)Ending balance in accounts receivable =Beginning+sales -collection-write off +reinstated

  $=201700+875700=[796820+2808]-7410+2808$

      = 273170  

Ending balance in allowance account : 25830  

c)Net realizable value :Accounts receivable -allowance for doubtful account  

     = 273170 minus 25830

 = $ 247340