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Chapter 16, End of Chapter, Self-Study Demonstration Problem, Exercise 1

### Explanation

Allowance for doubtful debt:

The estimated uncollectible amount is \$73,500.

The opening balance in allowance for doubtful account is \$28,775.

Entries:

On March 6, 50% of 12,000 is written off and the rest is received in cash. Cash is debited by \$6,000 , Allowance for doubtful accounts is debited by \$6,000 and CG's account is credited by \$12,000

On June 12, \$2,250 is reinstated. RB's account is debited by \$2,250 and Allowance for doubtful accounts credited by \$2,250.

On September 19, \$13,800 is written off. Allowance for doubtful accounts is debited by \$13,800 and KR's account is credited by \$13,800.

On November 9, \$2,175 reinstated. JK's account is debited by \$2,175 and Allowance for doubtful accounts credited by \$2,175.

On December 27, multiple accounts written off totalling \$50,850. Allowance for doubtful accounts is debited by \$50,850 and Different receivables' account is credited by their respective amounts of \$10,480 , \$8,750 , \$22,500 , \$9,300 respectively.

On December 31, adjusting entry is made for \$44,725 which brings the balance to \$73,500. Bad debt expense is debited \$44,725 and Allowance for doubtful accounts is credited by \$44,725.

Income summary:

On December 31, bad debt expense is posted to income statement. Income summary is debited by \$44,725 and Bad Debt expense is credited by \$44,725. Balance of income summary is \$44,725.

On December 31, adjusting entry is made for \$44,725. Bad debt expense is debited \$44,725 and Allowance for doubtful accounts is credited by \$44,725.

On December 31, bad debt expense is posted to income statement. Income summary is debited and Bad Debt expense is credited. The remaining balance is NIL.