Q3TI - Horngren'S Financial And Managerial Accounting

Question

Johnson Company uses the allowance method to account for uncollectible receivables. On September 2, Johnson wrote off a

\(14,000 account receivable from customer J. Mraz. On December 12, Johnson unexpectedly received full payment from Mraz on

the previously written off account. Johnson records an adjusting entry for bad debts expense of \)800 on December 31.

9. Journalize Johnson’s write-off of the uncollectible receivable.

10. Journalize Johnson’s collection of the previously written off receivable.

11. Journalize Johnson’s adjustment for bad debts expense.

Step-by-Step Solution

Answer

(9) Allowance for bad debts account will be debited and accounts receivable-J.Miraz will be credited by $14,000 respectively. 

(10) Firstly, Accounts receivable- J. Mraz will be debited and allowance for Bad Debts will be credited by $14,800, respectively. Then, cash account will be debited and accounts Receivable- J. Mraz will be credited by $14,800, respectively. 

(11) Bad debt expense will be debited and allowance for bad debts will be credited by $800, respectively. 

Step 1: Definition of bad debts

Bad debt represents the amount owed by the customers that remains uncollectible.

Step 2: Journal entry for written-off

Date	Particulars	Debit	Credit
September 2	Allowance for Bad Debts	$14,000
	Accounts Receivable- J. Mraz		$14,000
	(Write-off uncollectible account)

Step 3: Journal entry for reinstatement and collection

December 12	Accounts Receivable- J. Mraz	$14,000
	Allowance for Bad Debts		$14,000
	(Reinstated previously written off bad debts)
December 12	Cash	$14,000
	Accounts Receivable- J. Mraz		$14,000
	(Collected cash on account)

 

Step 4: Journal entry for adjustment of bad debts expense

Date	Particulars	Debit	Credit
December 31	Bad Debts Expense	$800
	Allowance for Bad Debts		$800
	(Adjustment entry for bad debts)