Question

During 2021, its first year of operations, Pave Construction provides services on account of $160,000. By the end of 2021, cash collections on these accounts total $110,000. Pave estimates that 25% of the uncollected accounts will be uncollectible. In 2022, the company writes off uncollectible accounts of $10,000.

Required:
a. Record the adjusting entry for uncollectible accounts on December 31, 2021.
b. Record the write-off of accounts receivable in 2022.

Answer 1

Answer:

a. Adjusting Entry for Uncollectible Accounts on December 31, 2021.

       Account title

Allowance for uncollectible account    $10000 (Debit)  

Accounts receivable                              $10000  (Credit)

b.  Write-off of accounts

-Accounts receivable at end= $160000- $110000 = $50000  

-Balance at beginning of 2022 in allowance account = $50000 * 25% =$12500

 Beginning balance in 2022         $12500

 Less: Write off                             -$10000

 Ending balance in 2022              $2500 (Credit)