The income statement approach to estimating uncollectible accounts expense is used by kerley company. on february 28, the firm had accounts receivable in the amount of $437,000 and allowance for doubtful accounts had a credit balance of $2,140 before adjustment. net credit sales for february amounted to $3,000,000. the credit manager estimated that uncollectible accounts expense would amount to 1% of net credit sales made during february. on march 10, an accounts receivable from kathy black for $6,100 was determined to be uncollectible and written off. however, on march 31, black received an inheritance and immediately paid her past due account in full. prepare the journal entries made by hayes company on the below dates: (credit account titles are automatically indented when the amount is entered. do not indent manually.)1. feb 282. march 103. march 31

Feb 28.

Dr Bad Debt Expense$ 27,860

Cr Allowance for Uncollectible Accounts$ 27,860

Dr Allowance for Uncollectible Accounts$ 6,100

Cr Accounts receivable$ 6,100

Dr Accounts receivable$ 6,100

Cr Allowance for Uncollectible Accounts$ 6,100

Dr CASH$ 6,100

Cr Accounts receivable$ 6,100

Explanation:

February 28  

Dr Accounts receivable$ 437.000

Cr Allowance for Uncollectible Accounts$ 2.140

Net Credit Sales February$ 3.000.000

Uncollectible accounts expense would amount to 1% of net credit sales made during February.  

Dr Bad Debt Expense$ 27.860

Cr Allowance for Uncollectible Accounts$ 27.860

On March 10, an accounts receivable from Kathy Black for $6,100 was determined to be uncollectible and written off.  

Dr Allowance for Uncollectible Accounts$ 6.100

Cr Accounts receivable$ 6.100

March 31, Black received an inheritance and immediately paid her past due account in full.  

Dr Accounts receivable$ 6.100

Cr Allowance for Uncollectible Accounts$ 6.100

Dr CASH$ 6.100

Cr Accounts receivable$ 6.100

If the company applies the allowance method, it means that the account Allowance for Uncollectible Accounts must show as balance the % estimated of accounts receivables as CREDIT.  

Bad accounts are those credits granted by the company and there is no possibility of being charged.  

"When customers buy products on credits but the company cannot collect the debt, then it's necessary

to cancel the unpaid invoice as uncollectible."  

One way is to directly cancel bad debts at the time it was decided that the credit is bad, the total amount reported as bad debt expenses negatively affect the income statement and the accounts receivable are reduced by the same amount, less assets  

The other way is to determine a percentage of the total amount of accounts receivable as bad debts, there are many ways to analyze accounts receivable and calculate the value of bad debts.  

When the company has the percentage of uncollectible accounts, the required journal entry is Bad Expenses (debit) with Reserve for Bad Accounts (credit)  

At the time of cancellation, since the expenses were recognized before, we only use the Allowance for Uncollectible Accounts (Debit)  with accounts receivable (credit), with this we are recognizing the bad credit of the company.