Pincus Associates uses the allowance method to account for bad debts. During 2021, its first year of operations, Pincus provided a total of $290,000 of services on account. In 2021, the company wrote off uncollectible accounts of $11,700. By the end of 2021, cash collections on accounts receivable totaled $245,700. Pincus estimates that 15% of the accounts receivable balance at 12/31/2021 will prove uncollectible. Required: 1. & 2. What journal entry did Pincus record to write off uncollectible accounts during 2021 and to recognize bad debt expense for 2021? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
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.
Pincus Associates uses the allowance method to account for
Required:
1. & 2. What
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