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22 December, 09:32

At December 31, 2019, Blanda Company had a credit balance of $15,000 in Allowance for Doubtful Accounts. During 2020, Blanda wrote off accounts totaling $11,000. One of those accounts ($1,800) was later collected. At December 31, 2020, an aging schedule indicated that the balance in Allowance for Doubtful Accounts should be $19,000. Instructions: Prepare journal entries to record the 2020 transactions of Blanda Company.

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  1. 22 December, 11:04
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    journal entries

    Write-off

    Debit Bad Debts expense $11,000 Credit Accounts receivable $11,000

    Recovery

    Debit Bank $1,800 Credit Bad Debt Recovered income $1,800

    Allowance for Doubtful debt Adjustment

    Debit Allowance for doubtful debt Adjustment $4,000 Credit Allowance for doubtful debt $4,000

    Explanation:

    Write-off

    The write-off creates an expense (bad debt) and and decreases an asset (Accounts receivable)

    Recovery

    Since the amount has been written off as bad, when it is recovered it is no longer recognized as a payment on accounts receivable but an income the entity thought was lost.

    Allowance for doubtful debt adjustment

    The differences in the opening balance and closing balance either creates an expense or an income adjustment. These estimates are on net Accounts receivables (after bad debts) are a negative assets.

    19000 - 15000 = 4000 (increase) adjustment and is an expense.
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