Assume the following information for Teal Mountain Corp. Accounts receivable (beginning balance) $143,000
Allowance for doubtful accounts (beginning balance) 11,340
Net credit sales 930,000 Collections 912,000
Write-offs of accounts receivable 6,400
Collections of accounts previously written off 2,200
Uncollectible accounts are expected to be 6% of the ending balance in accounts receivable.
1. Prepare the entries to record sales and collections during the period.
2. Prepare the entries to record the recovery of the uncollectible account during the period.
3. Determine the ending balance in Accounts Receivable and the unadjusted balance in Allowance for Doubtful Account.
4. Prepare the entry to record bad debt expense for the period.
5. Determine the ending (adjusted) balance in Allowance for Doubtful Accounts.

Teal Mountain Corp.

1. Entries to record sales and collections during the period:

Debit Accounts Receivable $930,000

Credit Sales Revenue $930,000

To record credit sales.

Debit Cash Account $912,000

Credit Accounts Receivable $912,000

To record cash collections.

2. Entries to record recovery of the uncollectible account:

Debit Cash Account $2,200

Credit Allowance for doubtful accounts $2,200

To record uncollectible previously written off

3. Ending balance in Accounts Receivable and unadjusted balance in Allowance for Doubtful Account:

Accounts Receivable

Beginning balance $143,000

Credit Sales             930,000

Collections              -912,000

Write-offs                   - 6,400

Balance                 $154,600

Allowance for Doubtful Accounts (Unadjusted)

Beginning balance          $11,340

Uncollectible written off  -6,400

Uncollectible collections  2,200

Balance (unadjusted)      $2,740

4. Entry to record bad debt expense for the period:

Debit Bad Expense $6,536

Credit Allowance for Doubtful Accounts $6,536

To bring the balance to $9,276.

5. Adjusted ending balance in Allowance for Doubtful Accounts = $9,276

Explanation:

6% of accounts receivable = $154,600 x 6% =  $9,276

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