At year-end (December 31), Chan Company estimates its bad debts as 0.40% of its annual credit sales of $751,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $376 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off. Prepare Chan's journal entries for the transactions.

When Amount of Allowance for estimated doubtful debts is made :

Bad Debts $3,004 (debit)

Allowance for Doubtful Debts $3,004 (credit)

When Chan writes off P. Park on February 1

Allowance for doubtful $376 debts (debit)

Trade Receivable - P.Park $376 (credit)

When Park unexpectedly pays the amount previously written off

Accounts Receivable - P.Park $376 (debit)

Allowance for doubtful debt $376 (credit)

Reinstate the debt

Bank $376  (debit)

Trade Receivable - P.Park $376 (credit)

Recognise cash receipt

Explanation:

When Amount of Allowance for estimated doubtful debts is made :

$751,000 × 0.40%

$3,004

Bad Debts $3,004 (debit)

Allowance for Doubtful Debts $3,004 (credit)

When Chan writes off P. Park on February 1

Allowance for doubtful $376 debts (debit)

Trade Receivable - P.Park $376 (credit)

When Park unexpectedly pays the amount previously written off

Accounts Receivable - P.Park $376 (debit)

Allowance for doubtful debt $376 (credit)

Reinstate the debt

Bank $376  (debit)

Trade Receivable - P.Park $376 (credit)

Recognise cash receipt

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explanation:

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