Required information [The following information applies to the questions displayed below.] At year-end December 31, Chan Company estimates its bad debts as 0.60% of its annual credit sales of $955,000. Chan records its bad debts expense for that estimate. On the following February 1, Chan decides that the $478 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.
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.
1. Record the estimated
2. Wrote off P. Park's account as uncollectible.
3. Reinstated Park's previously written off account.
4. Record the cash received on account.
Step by step
Solved in 2 steps with 1 images
