Prepare entries to record the following transactions using the allowance method for uncollectible accounts.
a. The firm assumes that approximately 1% of total sales on account will prove uncollectible. Sales for Year 1 are $1,000,000. All sales are on account.
b. On July 7, Year 2, it is determined that an account of $2,000 will not be collected.
c. On August 14, Year 2, it is determined that an account of $3,000 will not be collected.
d. On December 31, Year 2, the company estimates that 2% of total credit sales of $2,000,000 will be uncollectible.
e. On February 1, Year 3, it is determined that accounts of $6,000 will not be collected.
f. On March 2, Year 3, $1,000 is collected on an account that had previously been written off as uncollectible in (e).
It is determined that the account was originally written off in error.
a. The sales value is $1,000,000 and 1% will be uncollectible. The amount is 1,000,000X1%=$10,000
The entry is
Bad Debt Expense Dr 10,000
Allowance for Doubtful Accounts Cr 10,000
b. When the amount is uncollectible, it is written off against the allowance account.
The entry is
Allowance for ...
The solution explains the journal entries using the allowance method of uncollectible accounts