Illustrate the effects on the accounts and financial statements of the following
ID: 2488222 • Letter: I
Question
Illustrate the effects on the accounts and financial statements of the following transactions in the accounts of MedTech Co., a local hospital supply company that uses the direct write-off method of accounting for uncollectible receivables:
Feb. 14. Received $9,000 on an account and wrote off the remainder owed of $45,000 as uncollectible.
Dec. 23. Reinstated the account that had been written off on February 14 and received $45,000 cash in full payment.
If I could see this in excel I would appreciate it.
Explanation / Answer
Direct write-off method of accounting for uncollectible receivables:
Date:Feb. 14
Debit Cash $9000
Debit Bad Debts $45000
Credit Accounts Receivables $54000
(Received $9,000 on an account and wrote off the remainder owed of $45,000 as uncollectible)
Date: Dec. 23
Debit Accounts Receivables $45000
Credit Bad Debts $45000
(Reinstated the account that had been written off on February 14)
Date: Dec. 23
Debit Cash $45000
Credit Accounts Receivables $45000
(received $45,000 cash in full payment)