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Chapter 8: Q2TI (page 438)

Williams Company uses the direct write-off method to account for uncollectible receivables. On July 18, Williams wrote off a

$6,800 account receivable from customer W. Jennings. On August 24, Williams unexpectedly received full payment from Jennings

on the previously written off account.

7. Journalize Williams’s write-off on the uncollectible receivable.

8. Journalize Williams’s collection of the previously written off receivable

Short Answer

Expert verified

(7) Bad debts expense account will be debited and accounts receivable-W.Jennings will be credited by $6,800, respectively.

(8) Firstly, accounts receivable-W.Jennings will be debited and bas debt expense will be credited by $6,800, respectively. Then, cash account will be debited and accounts receivable-W.Jennings will be credited by $6,800, respectively.

Step by step solution

01

Definition of bad debts

Bad debt is the amount that is not received from the customers.

02

 Journal entry for uncollectible receivable

Date

Particulars

Debit

Credit

July 18

Bad Debts Expense

$6,800

Accounts Receivable- W. Jennings

$6,800

(Wrote off an uncollectible account.)

03

Journal entry for collection of previously written off receivable

Date

Particulars

Debit

Credit

August 24

Accounts Receivable- W. Jennings

$6,800

Bad Debts Expense

$6,800

(Reinstated previously written off account)

August 24

Cash

$6,800

Accounts Receivable- W. Jennings

$6,800

(Collected cash on account)

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Most popular questions from this chapter

At January 1, 2018, Hilltop Flagpoles had Accounts Receivable of \(28,000, and Allowance for Bad Debts had a credit balance of \)3,000. During the year, Hilltop Flagpoles recorded the following:

a. Sales of \(185,000 (\)164,000 on account; \(21,000 for cash). Ignore Cost of Goods Sold.

b. Collections on account, \)135,000.

c. Write-offs of uncollectible receivables, $2,300.

Requirements

1. Journalize Hilltop’s transactions that occurred during 2018. The company uses the allowance method.

2. Post Hilltop’s transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts.

3. Journalize Hilltop’s adjustment to record bad debts expense assuming Hilltop estimates bad debts as 3% of credit sales. Post the adjustment to the appropriate T-accounts.

4. Show how Hilltop Flagpoles will report net accounts receivable on its December 31, 2018, balance sheet.

Ensuring internal control over the collection of receivables Consider internal control over receivables collections. What job must be withheld from a company’s credit department in order to safeguard its cash? If the credit department does perform this job, what can a credit department employee do to hurt the company?

Recording credit sales and collections

Record the following transactions for Summer Consulting. Explanations are not required.

Apr. 15

Provided consulting services to Bob Jones and billed the customer \(1,500.

18

Provided consulting services to Samantha Cruise and billed the customer \)865.

25

Received \(750 cash from Jones.

28

Provided consulting services to Regan Taylor and billed the customer \)625.

28

Received \(865 cash from Cruise.

30

Received \)1,375 cash, \(750 from Jones and \)625 from Taylor

Collecting a receivable previously written off—direct write-off method

Spring Garden Greenhouse had trouble collecting its account receivable from Steve Stone. On June 19, 2018, Spring Garden Greenhouse finally wrote off Stone’s \(600 account receivable. On December 31, Stone sent a \)600 check to Spring Garden Greenhouse.

Journalize the entries required for Spring Garden Greenhouse, assuming Spring Garden Greenhouse uses the direct write-off method.

When is bad debts expense recorded when using the direct write-off method?
See all solutions

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