On January 1, Wei company begins the accounting period with a $38,000 credit balance in Allowance for Doubtful Accounts. On February 1, the company determined that $8,400 in customer accounts was uncollectible; specifically, $1,700 for Oakley Co. and $6,700 for Brookes Co. Prepare the journal entry to write off those two accounts. On June 5, the company unexpectedly received a $1,700 payment on a customer account, Oakley Company, that had previously been written off in part a. Prepare the entries to reinstate the account and record the cash received.

Answer and Explanation:

The journal entries are shown below:

On February 1,

Allowance for doubtful accounts    Dr.   $8,400

        To Accounts receivable-Oakley co.  $1,700

        To Accounts receivable-Brookes Co. $6,700

(Being the allowance for doubtful debt is recorded)

Here the allowance is debited as it increased the assets and credited the account receivable as it decreased the assets

On June 5,

Accounts receivable- Oakley A/c    Dr.  $1,700

       To Allowance for doubtful accounts     $1,700

(being the reinstate the account is recorded)

Here the account receivable is debited as it increased the assets and credited the allowance as it decreased the assets

Cash A/c             Dr.  $1,700

        To Accounts receivable- Oakley $1,700

(Being the cash received is recorded)

Here the cash is debited as it increased the assets and credited the account receivable as it decreased the assets