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Chapter 8: Q4SE (page 466)

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.

Short Answer

Expert verified

When the company has received the previously written off receivable then the same has to Reinstate the previously written off amount and the collection entry will be posted.

Step by step solution

01

Collection of written off Receivable

When the company has received the previously written off receivable then the same has to Reinstate the previously written off amount and the collection entry will be posted.

02

Step 2: Journalize the transactions for Spring Garden Greenhouse

Date

Account and explanation		Debit Credit
June 19, 2018

Bad Debts

Accounts receivable – Steve stone

(Wrote off an uncollectible account)
$ 600
$ 600
Dec 13, 2018

Accounts receivable – Steve stone

Bad Debts Expense

Reinstated previously written off account.

$ 600
$ 600
Dec 13, 2018

Cash

Accounts receivable – Steve stone

Collected cash on account
$ 600
$ 600

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Most popular questions from this chapter

What are some benefits to a business in accepting credit cards and debit cards?

Applying the allowance method to account for uncollectibles

The Accounts Receivable balance and Allowance for Bad Debts for Signature Lamp

Company at December 31, 2017, was \(10,800 and \)2,000 (credit balance), respectively.

During 2018, Signature Lamp Company completed the following transactions:

a. Sales revenue on account, \(273,400 (ignore Cost of Goods Sold).

b. Collections on account, \)223,000.

c. Write-offs of uncollectibles, \(5,900.

d. Bad debts expense of \)5,200 was recorded

Requirements

1. Journalize Signature Lamp Company’s transactions for 2018 assuming Signature Lamp Company uses the allowance method.

2. Post the transactions to the Accounts Receivable, Allowance for Bad Debts, and Bad Debts Expense T-accounts, and determine the ending balance of each account.

3. Show how accounts receivable would be reported on the balance sheet at December 31, 2018.

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 10% of accounts receivable. 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

When dealing with receivables, give an example of a subsidiary account

Dialex Watches completed the following selected transactions during 2018 and 2019:

2018

Dec. 31 Estimated that bad debts expense for the year was 3% of credit sales of

\(410,000 and recorded that amount as expense. The company uses the

allowance method.

31 Made the closing entry for bad debts expense.

2019

Jan. 17 Sold merchandise inventory to Marty White, \)400, on account. Ignore Cost of

Goods Sold.

Jun. 29 Wrote off Marty White’s account as uncollectible after repeated efforts to

collect from him.

Aug. 6 Received \(400 from Marty White, along with a letter apologizing for being

so late. Reinstated White’s account in full and recorded the cash receipt.

Dec. 31 Made a compound entry to write off the following accounts as uncollectible:

Barry Krisp, \)1,600; Maria Bryant, \(1,100; and Richard Renik, \)400.

31 Estimated that bad debts expense for the year was 3% on credit sales of

\(490,000 and recorded the expense.

31 Made the closing entry for bad debts expense.

Requirements

1.Open T-accounts for Allowance for Bad Debts and Bad Debts Expense, assuming

the accounts begin with a zero balance. Record the transactions in the general

journal (omit explanations), and post to the two T-accounts.

2.Assume the December 31, 2019, balance of Accounts Receivable is \)136,000. Show

how net accounts receivable would be reported on the balance sheet at that date.
See all solutions

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