At the end of 2021, Novak Corp. has accounts receivable of $778,200 and an allowance for doubtful accounts of $35,700. On January 24, 2022, it is learned that the company's receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $7,200. On March 4, 2022, Novak Corp. receives payment of $7,200 in full from Madonna Inc. Prepare the journal entries to record this transaction. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation (To reverse write-off) (To record collection from Madonna) Debit 7,200 7,200 Credit 7,200 7,200
At the end of 2021, Novak Corp. has accounts receivable of $778,200 and an allowance for doubtful accounts of $35,700. On January 24, 2022, it is learned that the company's receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $7,200. On March 4, 2022, Novak Corp. receives payment of $7,200 in full from Madonna Inc. Prepare the journal entries to record this transaction. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation (To reverse write-off) (To record collection from Madonna) Debit 7,200 7,200 Credit 7,200 7,200
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question
4A
![### Journal Entries for Accounts Receivable: Novak Corp.
At the end of 2021, Novak Corp. has accounts receivable of $778,200 and an allowance for doubtful accounts of $35,700. On January 24, 2022, it is learned that the company's receivable from Madonna Inc. is not collectible, and management authorizes a write-off of $7,200. On March 4, 2022, Novak Corp. receives payment of $7,200 in full from Madonna Inc.
**Instructions:**
Prepare the journal entries to record this transaction. (Note: Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
#### Journal Entries:
1. **To Reverse Write-off:**
| Account Titles and Explanation | Debit | Credit |
|--------------------------------|-------|--------|
| [Account Name] | | 7,200 |
| [Account Name] | 7,200 | |
2. **To Record Collection from Madonna:**
| Account Titles and Explanation | Debit | Credit |
|--------------------------------|-------|--------|
| [Account Name] | | 7,200 |
| [Account Name] | 7,200 | |
These entries illustrate how Novak Corp. initially writes off the bad debt and subsequently reverses the write-off upon receipt of the payment from Madonna Inc.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4c8d4003-6dbe-4a96-8cef-3ca09402ad71%2Feb4ab955-1a8a-4456-902e-ba7ec71ba624%2Fqj9ze5r_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Journal Entries for Accounts Receivable: Novak Corp.
At the end of 2021, Novak Corp. has accounts receivable of $778,200 and an allowance for doubtful accounts of $35,700. On January 24, 2022, it is learned that the company's receivable from Madonna Inc. is not collectible, and management authorizes a write-off of $7,200. On March 4, 2022, Novak Corp. receives payment of $7,200 in full from Madonna Inc.
**Instructions:**
Prepare the journal entries to record this transaction. (Note: Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
#### Journal Entries:
1. **To Reverse Write-off:**
| Account Titles and Explanation | Debit | Credit |
|--------------------------------|-------|--------|
| [Account Name] | | 7,200 |
| [Account Name] | 7,200 | |
2. **To Record Collection from Madonna:**
| Account Titles and Explanation | Debit | Credit |
|--------------------------------|-------|--------|
| [Account Name] | | 7,200 |
| [Account Name] | 7,200 | |
These entries illustrate how Novak Corp. initially writes off the bad debt and subsequently reverses the write-off upon receipt of the payment from Madonna Inc.
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