Question:
Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2013, accounts
receivable totaled $625,000. The allowance method is used to account for uncollectible accounts. The
allowance for uncollectible accounts had a credit balance of $32,000 at the beginning of 2013 and
$21,000 in receivables were written off during the year as uncollectible. Also, $1,200 in cash was
received in December from a customer whose account previously had been written off. The company
estimates bad debts by applying a percentage of 10% to accounts receivable at the end of the year.
Required:
1. Prepare journal entries to record the write-off of receivables, the collection of $1,200 for previously
written off receivables, and the year-end adjusting entry for bad debt expense.
2. How would accounts receivable be shown in the 2013 year-end balance sheet?
Answer:
Requirement 1
To record the write-off of receivables:
Allowance for uncollectible accounts.................................................... 21,000
Accounts receivable.......................................................................... 21,000
To reinstate an account previously written off and to record the collection:
Accounts receivable............................................................................... 1,200
Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2013, accounts
receivable totaled $625,000. The allowance method is used to account for uncollectible accounts. The
allowance for uncollectible accounts had a credit balance of $32,000 at the beginning of 2013 and
$21,000 in receivables were written off during the year as uncollectible. Also, $1,200 in cash was
received in December from a customer whose account previously had been written off. The company
estimates bad debts by applying a percentage of 10% to accounts receivable at the end of the year.
Required:
1. Prepare journal entries to record the write-off of receivables, the collection of $1,200 for previously
written off receivables, and the year-end adjusting entry for bad debt expense.
2. How would accounts receivable be shown in the 2013 year-end balance sheet?
Answer:
Requirement 1
To record the write-off of receivables:
Allowance for uncollectible accounts.................................................... 21,000
Accounts receivable.......................................................................... 21,000
To reinstate an account previously written off and to record the collection:
Accounts receivable............................................................................... 1,200
