Bad debt expense QUESTION MARK?

Question

I need help with understanding this problem:

A company had sales revenue of 141,000, of which 70,550 was on credit. A/R showed a 8,300 debit balance, and Allowance for doubtful accounts showed a 665 credit balance. A/R collections amounted to 56,440.

1.AN A/R of 1,245 was written off immediately as bad debt.

2. For the rest of the year a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year.

Now I need help figuring out how and why I make the journal entries for the two above items.

I hope a kind soul will show me mercy

Answer 1

If I understand you  correctly,

.

1) DR  revenue - 665

    CR  doubtful account - 665

  

2)DR  doubtful account - 665

    DR  revenue           -   580

    CR  A/R                   1245

now your doubtful account will be 0

3) 2% of the sales 2820, they already write off

    1245  . so end of year transaction

    will be:

   DR revenue -  1575

   CR doubtful accounts - 1575



Revenue                        141000      100%

Bad debt                         -665

                                       -580            

                                      -1575

--------------------------------------...

Total revenue                  138180

A/R                                  8300

Bad debt                          -1245

----------------------------------------...

  Net A/R                           7055

doubtful accounts               665

                                        -665

                                        1575

--------------------------------------...

                                          1575