Oriole Tools uses the allowance method to account for uncollectible accounts.

May 20 The account of Barack Obama for $1,092 was deemed to be uncollectible and is written off as a bad debt.
Aug. 7 Received a check for $264 from Barack Obama whose account had previously been written off as uncollectible.
Dec. 31 Use the following information for the year-end adjusting entry:
The balances of Accounts Receivable and Allowance for Doubtful Accounts at year- end are $104,800 and $104, respectively, both with debit balances. It is estimated that bad debts will be 1.5% of accounts receivable.

Prepare the appropriate journal entries to record the above transactions during 2014

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anthougo anthougo · Answer 1 · 2022-07-25T20:54:22+02:00

1. The appropriate journal entries to record the transactions during 2014 for Oriole Tools are as follows:

May 20 Debit Allowance for Doubtful Accounts $1,092

Credit Accounts Receivable $1,092

Aug. 7 Debit Accounts Receivable $264

Credit Allowance for Doubtful Accounts $264

Debit Cash $264

Credit Accounts Receivable $264

2. The appropriate adjusting entries to record the adjustments year-end for Oriole Tools are as follows:

Dec. 31 Debit Bad Debts Expense $1,676

Credit Allowance for Doubtful Accounts $1,676

May 20 Allowance for Doubtful Accounts $1,092 Accounts Receivable $1,092

To write off as a bad debt.

Aug. 7 Accounts Receivable $264 Allowance for Doubtful Accounts $264

To reverse a previously written-off uncollectible.

Cash $264 Accounts Receivable $264

To record the receipt of cash on account.

Dec. 31 Bad Debts Expense $1,676 Allowance for Doubtful Accounts $1,676

The balances of at year-end:

Accounts Receivable = $104,800 DR

Allowance for Doubtful Accounts = $104 DR

Estimated bad debts = $1,572 (1.5% x $104,800)

Bad Debts Expense = $1,676 ($104 + $1,572)

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