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Estimating and Recording Bad Debt Estimates and Write$-$Offs; Reporting of Accounts Receivable

Mast Company$$s December $31$ balances from the prior year related to accounts receivable follow.

Accounts receivable $($Dr$.)$ $$560,000$

Allowance for doubtful accounts $($Cr$.)28,000$

During the current year, $$63,000$ of accounts receivable is considered uncollectible, and no more effort to collect these accounts will be made. Total sales for the current year are $$1,680,000,$ of which $$280,000$ are cash sales. A total of $$1,260,000$ cash was collected during the current year from sales that were originally made on account.

Required

a$.$ Assuming that Mast applies the allowance method to estimate net accounts receivable and uses $9\%$ of accounts receivable as its estimate of expected credit losses, prepare the $(1)$ journal entries to record write$-$offs and to record bad debt expense for the current year, and $(2)$ disclosure on gross and net accounts receivable on the balance sheet at December $31$ of the current year.

$$ Note: Do not use negative signs in your answers.

a$.(1)$

Date Account Name Dr$.$ Cr$.$

Dec. $31$

Allowance for Doubtful Accounts

$63,000$

$0$

Answer $1$

Accounts Receivable

$0$

$63,000$

Answer $2$

To record account write$-$off.

Dec. $31$

Bad Debt Expense

$79,730$

$0$

Answer $3$

Allowance for Doubtful Accounts

$0$

$79,730$

Answer $4$

To record bad debt expense.

a$.(2)$

Balance Sheet, December $31$

Accounts receivable Answer $5$

$497,000$

Less: Allowance for doubtful accounts Answer $6$

$44,730$

Accounts receivable, net Answer $7$

$452,270$

b$.$ How would your answers to part a change, if at all, assuming instead that the prior year December $31$ balance in Allowance for Doubtful Accounts was a credit of $$7,000?$

$$ Note: Do not use negative signs in your answers.

b$.(1)$

Date Account Name Dr$.$ Cr$.$

Dec. $31$

Allowance for Doubtful Accounts

$63,000$

$0$

Answer $8$

Accounts Receivable

$0$

$63,000$

Answer $9$

To record account write$-$off.

Dec. $31$

Bad Debt Expense

$100,730$

$0$

Answer $10$

Allowance for Doubtful Accounts

$0$

$100,730$

Answer $11$

To record bad debt expense.

b$.(2)$

Balance Sheet, December $31$

Accounts receivable Answer $12$

$497,000$

Less: Allowance for doubtful accounts Answer $13$

$44,730$

Accounts receivable, net Answer $14$

$452,270$

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