Response to the following :
Collecting an Account Previously Written Off
Refer to the data in problem. Assume that one customer, whose account had previously been written off, returned from exile in the Bahamas and paid his account of $7,000. Make the journal entry or entries necessary to record the receipt of this payment.
Problem:
The Allowance Method
The company had credit sales of $2,500,000 during the year, its first year of business. The company has estimated that $50,000 of these sales on account will ultimately be uncollectible. In addition, a year-end review of accounts identified that of the $200,000 in accounts outstanding as of the end of the year, $43,000 were worthless because the business customers associated with those accounts had gone bankrupt. Using the allowance method of accounting for bad debt expense, make the journal entries necessary to record
(1) bad debt expense for the year and
(2) the write-off of uncollectible accounts at the end of the year.