Milner Corp. uses the allowance method to account for uncollectible.?

Question

On October 31, it wrote off a $1,000 account of a customer, C. Schaub. On December 9, it receives a $200 payment from Schaub.

1. Prepare the journal entry or entries for October 31.

2. Prepare the journal entry or entries for December 9; assume no additional money is expected from Schaub.

Answer 1

On October 31, it wrote off a $1,000 account of a customer, C. Schaub.

1. Prepare the journal entry or entries for October 31.

Dr  Doubtful debts expense $1,000

Cr  Allowance for doubtful accounts $1,000

On December 9, it receives a $200 payment from Schaub.

2. Prepare the journal entry or entries for December 9; assume no additional money is expected from Schaub

Dr  Allowance for doubtful accounts $200

Cr  Doubtful debts expense $200

(being allowance no longer required)

Dr  Cash $200

Cr  AR $200

(being cash rec'd from Schaub)

Dr  Allowance for doubtful debts $800

Cr  AR $800

(to write off balance from Schaub no longer collectible)