Please explain how the problems are done so I understand. 1. J-Pac Co. uses the
ID: 2464088 • Letter: P
Question
Please explain how the problems are done so I understand.
1. J-Pac Co. uses the allowance Method to account for uncollectible Accounts Receivable. If they determine that customer Matt Evans' balance of $900 is uncollectible, the correct entry to write it off would be:
2. The Gallante Smoke Shop had written off a $550 receivable owed by P. Lang. Several months later, Lang remitted the $550. Gallante Smoke Shop should record the following:
3. Calculate the amount of interest that would be earned on a $12,000 9% 4 month note receivable.
Explanation / Answer
1. We have to write off the uncollectible Matt Evans' balance of $900, so the Journal entry is:
Debit Allowance for Doubtful Accounts $900
Credit Accounts Receivables $900
(under the allowance Method to account for uncollectible Accounts Receivable, credit in the Allowance exists in the balance sheet, so all write off are made against that.)
2. On the recovery of the written off accounts, the journal entry is:
Debit Cash $550
Credit Allowance for Doubtful Accounts $550
(effect of the previous write off are that the Allowance was used, so now we create back the allowance so utilized)
3. the amount of interest that would be earned on a $12,000 9% 4 month note receivable :
Interest on the note receivable are = $12000 * 9% * 4/12 = $360