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Bad Debts Accounting AR
Bad Debts Accounting AR
M eth o d s o f A c co u tn in g fo r B ad d eb ts
A L L O W A N C E M E TH O D D IR E C T W R ITE -O F F
M E TH O D
1. Recognition of Doubtful Dr. Doubtful Accounts Expense
Accounts NO ENTRY
Cr. Allowance for Doubtful
Acc Exp
2. Write-off of Doubtful Dr. Allowance for Doubtful Acc Dr. Doubtful Accts. Exp
Accounts Exp
Cr. Accounts Receivable
Cr. Accounts Receivable
3. Recovery of Doubtful Dr. Accounts Receivable
Accounts
Cr. Allowance for Doubful Acc
Exp
SAMPLE PROBLEM
When the allowance method of recognizing bad debt expense is used, the entries at the time of
collection of an account previously written off would
You don’t have to be the best. Just be better every single day.
Methods of Accounting for Bad debts
Estimation of Doubtful Accouunts
E S T IM A T IN G B A D D E B T S
1. Manchester Company provided the following accounts abstracted from the unadjusted trial
balance on December 31, 2014:
Debit Credit
The entity estimated that 3% of the gross accounts receivable will become uncollectible.
What amount should be recognized as doubtful accounts expense for 2014?
A. 110,000 C. 190,000
B. 150,000 D. 600,000
You don’t have to be the best. Just be better every single day.
Methods of Accounting for Bad debts
Estimation of Doubtful Accouunts
Aging of receivables
0- 60 1,200,000 1%
61 - 120 900,000 2%
3,100,000
During 2014, the entity wrote off P70,000 in accounts receivable and recovered P40,000
that had been written off in prior years. On January 1, 2014, the allowance for uncollectible
accounts was P 100,000. Under the aging method, what amount of allowance for
uncollectible accounts should be reported on December 31,2014?
A 90,000 C. 130,000
B. 100,000 D. 190,000
You don’t have to be the best. Just be better every single day.
Methods of Accounting for Bad debts
Estimation of Doubtful Accouunts
For the year ended December 31, 2014, what amount should be recognized as doubtful
accounts expense?
A . 100,000 C. 200,000
B. 150,000 D. 230,000
4. At year-end, Barr Company reported net sales of P7,100,000 and allowance for doubtful
accounts with debit balance of P16,000 before adjustment. The entity estimated the
uncollectible accounts receivable at 2% of net sales. What is the allowance for doubtful
accounts at year-end?
A. 126,000 C. 144,500
B. 142,000 D. 158,000
You don’t have to be the best. Just be better every single day.
Methods of Accounting for Bad debts
Estimation of Doubtful Accouunts
5. Ladd Company provided the following data for the current year:
The entity provided for doubtful accounts expense at the rate of 3% of net sales. What is
the allowance for doubtful accounts at year-end?
A. 235,000 C. 265,000
B. 241,000 D. 435,000
You don’t have to be the best. Just be better every single day.