Chapter 9, Problem P9.41CP

To determine

Allowance method:

Under allowance method, an allowance for bad debts is created with estimation before the bad debts actually become uncollectible. At the time of write-off of bad debts, the allowance for bad debt is debited and accounts receivable is credited. Allowance method aims at accounting for the bad debts during same period in which the sale occurred.

To determine:

1. Journalize the January 31 entry to record and establish the allowance using the percent-of-sales method for January sales revenue.

2. Prepare journal entry to write-off the customer’s bad debt.