Filler Company Uses the Allowance Method to Account for Bad

question 136

Essay

Filler Company uses the allowance method to account for bad debts. In the first year of operations (2019), Filler sold $640,000 of merchandise on credit, including a $3,500 sale to Bubba Long. On December 31, 2019, it provided an addition to its allowance for doubtful accounts equal to 1.8% of its credit sales. On June 1, 2020, Filler wrote off as uncollectible the $3,500 account of Bubba Long; and on December 25, 2020 Bubba Long unexpectedly paid his account in full. Prepare the journal entries that Filler Company should make:
(a) On December 31, 2019, to increase the allowance for doubtful accounts.
(b) On June 1, 2020, to write off the bad debt.
(c) On December 25, 2020, to record the unexpected collection from Bubba Long.

---

Definitions:

Operations

The day-to-day activities required for a business to function, encompassing everything from production to customer service.

Articles of Partnership

A document that outlines the terms and conditions of a partnership, including the responsibilities, profit distribution, and decision-making processes among partners.

Annual Salary

The total amount of money an employee is scheduled to earn over the course of a year, excluding bonuses or overtime.

Capital Balance

The amount of money that a company has in its accounts, representing the difference between total assets and liabilities.