Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000
a. First set of entries:
Debit: Accounts receivable with $2,000
Credit: Bad debt expenses with $2,000
b. Second set of entries:
Debit: Cash with $2,000
Credit: Account receivables $2,000
Explanation:
These entries will appear as follows in the book Gideon Company on July 10:
Details DR ($) CR ($)
Accounts receivable 2,000
Bad debt expenses 2,000
Being the transfer of the bad debt recovered back to the accounts receivable.
Cash 2,000
Account receivables 2,000
Being the cash income received in respect of bad debt recovered.
Debit Cash $2,000
Credit Bad debt $2,000
Being entries to record receivables settled by Hopkins that had previously been written off.
Explanation:
When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.
To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.
Where a debit that had previously been determined to have gone bad gets settled, debit cash and credit Bad debt or other income.
The following entries will be made on July 10
Explanation:
Account Receivable Dr.$2,000
Bad debt Expense Cr.$2,000
Bank Dr.$2,000
Account Receivable Cr.$2,000
Firstly the writ off made on May 3, was reinstated as the amount is collected then in second entry, we recorded collection of cash from A. Hopkins.
Accounts Receivable – A. Hopkins (Cred. $2,000)
A. Accounts Receivable-A. Hopkins 2,000
Allowance for Doubtful Accounts 2,000
Cash
Accounts Receivable-A. Hopkins 2,000
B. Cash 2.000
Explanation:
Based on the information given if July 10, Gideon received a check for the full amount of $2,000 from Hopkins which means that On July 10, the entry or entries that Gideon makes to record the recovery of the bad debt is:
Accounts Receivable2,000
Allowance for Doubtful Accounts 2,000
To receive cash
Cash2,000
Accounts Receivable 2000
