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8 February, 10:33

Johnson Company calculates its allowance for uncollectible accounts as 10% of its ending balance in gross accounts receivable. The allowance for uncollectible accounts had a credit balance of $30,000 at the beginning of 2021. No previously written-off accounts receivable were reinstated during 2021. At 12/31/2021, gross accounts receivable totaled $500,000, and prior to recording the adjusting entry to recognize bad debts expense for 2021, the allowance for uncollectible accounts had a debit balance of 55,000. Required: 1. What was the balance in gross accounts receivable as of 12/31/2020? 2. What journal entry should Johnson record to recognize bad debt expense for 2021? 3. Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2021. Determine the amount of accounts receivable written off during 2021. 4. If Johnson instead used the direct write-off method, what would bad debt expense be for 2021?

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  1. 8 February, 14:15
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    What was the balance in gross accounts receivable as of 12/31/2020?

    Accounts Receivable $ 585,000 31.12.2020

    What journal entry should Johnson record to recognize bad debt expense for 2021?

    Bad debt expense $ 105,000

    Allowance for Uncollectible Accounts $ 105,000

    Determine the amount of accounts receivable written off during 2021.

    Allowance for Uncollectible Accounts $ 85,000

    Accounts Receivable $ 85,000

    If Johnson instead used the direct write-off method, what would bad debt expense be for 2021?

    Bad debt expense $ 85,000

    Accounts Receivable $ 85,000

    Explanation:

    1. What was the balance in gross accounts receivable as of 12/31/2020?

    Accounts Receivable $ 500,000

    Allowance for Uncollectible Accounts $ 30,000

    Allowance for Uncollectible Accounts $ 55,000

    Accounts Receivable $ 585,000

    If you had a Accounts Receivable balance of $500,000 and you Uncollectible Accounts change from Credit $30,000 to debit $50,000

    it means that a journal entry was recorded as:

    Allowance for Uncollectible Accounts $ 85,000 - Debit

    Accounts Receivable $ 85,000 - Credit

    So the the Gross Account before the journal entry was $585,000

    2. What journal entry should Johnson record to recognize bad debt expense for 2021?

    The company has this balance accounts at the moment of the adjustment

    Initial Balance

    Accounts Receivable $ 500,000

    Allowance for Uncollectible Accounts - Debit Balance $ 55,000

    The Allowance for uncollectible accounts is 10%.

    It's necessary to make a journal entry to correct the allowance for uncollectible accounts.

    Bad debt expense $ 105,000

    Allowance for Uncollectible Accounts $ 105,000

    The final balance is:

    Final Balance

    Accounts Receivable $ 500,000

    Allowance for Uncollectible Accounts - Credit Balance $ 50,000

    Determine the amount of accounts receivable written off during 2021.

    It's the difference in the balance of the Accounts Allowance for Uncollectible Accounts from debit $30,000 to credit $55,000.

    If Johnson instead used the direct write-off method, what would bad debt expense be for 2021?

    In this case the journal entry to bad expenses would be $85,000, because it's the amount that the company written-off during 2021, that is the reason why Allowance for Uncollectible Accounts change from Credit to Debit.
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