Pincus Associates uses the allowance method to account for bad debts. During 2021, its first year of operations, Pincus provided a total of $126,000 of services on account. In 2021, the company wrote off uncollectible accounts of $5,100. By the end of 2021, cash collections on accounts receivable totaled $107,100. Pincus estimates that 10% of the accounts receivable balance at 12/31/2021 will prove uncollectible.

What journal entry did Pincus record to write off uncollectible accounts during 2021 and to recognize bad debt expense for 2021?

Journal entries

Explanation:

The journal entries are shown below:

1. Allowance for doubtful accounts Dr$5,100

          To Accounts Receivable  $5,100

(Being the written off uncollected amount is recorded)

2. Bad debts expense  $18,900

      Allowance for Doubtful Accounts   $18,900

(Being the bad debt expense is recorded)

The computation of is shown below:

= Ending balance of account receivable × estimated percentage

where,

Ending balance is

= Services on Account - Amount Written Off - Collection of accounts receivables

= $126,000 - $5,100 - $107,100

= $13,800

Now the bad debt expense is

= $13,800 + $5,100

= $18,900