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Exercise 7-6 Percent of sales method; write-off LO P3 At year-end (December 31), Chan Company estimates its bad debts as 0.70% of its annual credit sales of $641,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $321 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. Prepare Chan's journal entries for the transactions.

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Answer:

Explanation:

The journal entries are shown below:

December 31

Bad debt expense A/c Dr $448,700         ( $641,000 × 0.70%)

  To Allowance for Doubtful debts  $448,700

(Being bad debt expense is recorded)

February 1

Allowance for Doubtful debts A/c Dr $321

   To Accounts receivable                              $321

(Being uncollectible amount is recorded)

June 5

Allowance for Doubtful debts A/c Dr $321

   To Accounts receivable                              $321

(Being uncollectible amount is recorded)

June 5

Cash A/c Dr  $321

    To Accounts receivable   $321

(Being previously written off recorded)

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