Universal Co. sells discounted internet access to college students.  In 2021, sales for the year were $840,000, of which 60% were on credit.  Universal initially records bad debt expense as 2% of credit sales.  On January 1, 2021, the balance in the allowance for doubtful accounts was $8,000.  During 2021, Universal decided to write off $5,000 in uncollectible accounts.  It also recovered $2,500 of previously written-off amounts during 2021.  At year end, management reviewed outstanding receivables, and decided that a balance of $9,000 would be appropriate for the allowance account.   Required:   Prepare the journal entry for the initial recording of bad debt expense in the year  Prepare the journal entries for: -The write-off of uncollectible amounts in 2021 -The collection of previously written-off amounts in 2021.  3-Prepare the adjusting journal entry needed to bring the allowance account to its appropriate year-end balance.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1. Universal Co. sells discounted internet access to college students.  In 2021, sales for the year were $840,000, of which 60% were on credit.  Universal initially records bad debt expense as 2% of credit sales.  On January 1, 2021, the balance in the allowance for doubtful accounts was $8,000.  During 2021, Universal decided to write off $5,000 in uncollectible accounts.  It also recovered $2,500 of previously written-off amounts during 2021.  At year end, management reviewed outstanding receivables, and decided that a balance of $9,000 would be appropriate for the allowance account.

 

Required:

 

  1. Prepare the journal entry for the initial recording of bad debt expense in the year 
  2. Prepare the journal entries for:

-The write-off of uncollectible amounts in 2021

-The collection of previously written-off amounts in 2021. 

3-Prepare the adjusting journal entry needed to bring the allowance account to its appropriate year-end balance.

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