
Concept explainers
a.
Prepare the journal entries to record the credit sales, the collection on account and the preceding transactions and adjustments.
a.

Explanation of Solution
Allowance method:
It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method,
Prepare the journal entries to record the credit sales, the collection on account and the preceding transactions and adjustments as follows:
Date | Account Title and Explanation |
Debit ($) | Credit ($) |
811,000 | |||
Sales Revenue | 811,000 | ||
(To record the credit sales) |
Table (1)
Accounts receivable is a current asset, and it is increased. Therefore, debit accounts receivable account for $811,000.
Sales revenue is a component of
Journal entry for collections on account:
Date | Account Title and Explanation |
Debit ($) | Credit ($) |
Cash | 794,000 | ||
Accounts receivable | 794,000 | ||
(To record the collections on account) |
Table (2)
- Cash is a current asset, and it is increased. Therefore, debit cash account for $794,000.
- Accounts receivable is a current asset and it is decreased. Therefore, credit accounts receivable account for $794,000.
Journal entry for written-off J’s account:
Date | Account Title and Explanation | Debit ($) | Credit ($) |
January, 11 | Allowance for doubtful accounts | 2,800 | |
Accounts receivable – Company J | 2,800 | ||
(To write off the Company J’s account) |
Table (3)
- Allowance for doubtful accounts is a contra asset, and it is decreased. Therefore, debit allowance for doubtful accounts for $3,600.
- Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $3,600.
Journal entry for written-off B’s account:
Date | Account Title and Explanation | Debit ($) | Credit ($) |
April, 29 | Allowance for doubtful accounts | 1,000 | |
Accounts receivable – Company B | 1,000 | ||
(To write off the Company B’s account) |
Table (4)
- Allowance for doubtful accounts is a contra asset, and it is decreased. Therefore, debit allowance for doubtful accounts for $1,000.
- Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $1,000.
Journal entry for reinstate B’s account:
Date | Account Title and Explanation | Debit ($) | Credit ($) |
November, 15 | Accounts receivable – Company B | 1,000 | |
Allowance for doubtful accounts (1) | 1,000 | ||
(To reinstate the Company B’s account to the extent of the recovery) |
Table (5)
- Accounts receivable is a current asset, and it is increased. Therefore, debit accounts receivable account for $1,000.
- Allowance for doubtful accounts is a contra asset, and it is increased. Therefore, credit allowance for doubtful accounts for $1,000.
Journal entry to record the receipt of cash:
Date | Account Title and Explanation |
Debit ($) | Credit ($) |
November, 15 | Cash | 1,000 | |
Accounts receivable – Company B | 1,000 | ||
(To record the collection of cash on account.) |
Table (6)
- Cash is a current asset, and it is increased. Therefore, debit cash account for $1,000.
- Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $1,000.
Journal entry for written-off D’s account:
Date | Account Title and Explanation | Debit ($) | Credit ($) |
December, 5 | Allowance for doubtful accounts | 2,150 | |
Accounts receivable – Company D | 2,150 | ||
(To write off the Company D’s account) |
Table (7)
Allowance for doubtful accounts is a contra asset, and it is decreased. Therefore, debit allowance for doubtful accounts for $2,150.
Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $2,150.
Date | Account Title and Explanation |
Debit ($) | Credit ($) |
December 31 | Bad Debts Expense | 8,110 | |
Allowance for doubtful debts accounts | 8,110 | ||
(To record the adjusting entry of bad debts expense) |
Table (8)
Working note:
Calculate allowance for doubtful accounts.
Bad debts expense is a component of stockholders’ equity, and it is decreased. Therefore, debit bad debts expense account for $8,110.
Allowance for doubtful accounts is a contra asset, and it is increased. Therefore, credit allowance for doubtful accounts for 8,110.
b.
Show the accounts receivable and the allowance for doubtful accounts would appear on the December 31st
b.

Explanation of Solution
Company G | ||
Balance Sheet | ||
As on December 31st | ||
Particulars | Amount ($) | Amount ($) |
Assets: | ||
Current assets: | ||
Accounts receivable (Ending balance) | 137,050 | |
Less: Allowance for doubtful (Closing balance) | 9,960 | 127,090 |
Table (9)
Working notes:
Calculate ending accounts receivable amount.
Accounts Receivable Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
Beginning balance | $126,000 | Write-off – Company J | 2,800 | |||
During the year account receivable | 17,000 | Write-off – Company B | 1,000 | |||
Reinstate – Company B | 1,000 | Write-off – Company D | 2,150 | |||
Cash | 1,000 | |||||
Closing Balance | 137,050 | |||||
Total | 144,000 | Total | 144,000 |
Table (10)
(2)
Calculate the amount of accounts receivable during the year.
Calculate ending balance of allowance for doubtful accounts.
Allowance for Doubtful Account | ||||||
Date | Details |
Debit ($) | Date | Details |
Credit ($) | |
Write-off – Company J | 2,800 | Beginning balance | 6,800 | |||
Write-off – Company B | 1,000 | Bad Debts Expense | 8,110 | |||
Write-off – Company D | 2,150 | Reinstate – Company B | 1,000 | |||
Closing Balance | 9,960 | |||||
Total | 15,910 | Total | 15,910 |
Table (11)
Note: Accounts for doubtful debts account is a contra-asset account with a normal credit balance. Any increase is credited and decrease in it is debited.
(4)
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Chapter 8 Solutions
Financial Accounting for Undergraduates
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