Exercise 9-6 Percent of sales method; write-off LO P3 At year-end (December 31), Chan Company estimates its bad debts as 0.30% of its annual credit sales of $931,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $466 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.

Refer to the below for explanation.

Explanation:

December 31,

Amount estimated = Annual credit sales × 0.30.%

= $931,000 × 0.30%

= $2,793

Please see journal entries below;

December 31, Bad debts expense A/c Dr. $2,793

To allowance for doubtful accounts Cr $2,793

February 1, Allowance for doubtful A/c Dr. $466

To accounts receivable P.ParkCr $466

June 5, Accounts receivable P. Park account Dr $466

To allowance for doubtful accounts Cr $466

June 5,. Cash A/c Dr $466

To accounts receivable P.ParkCr $466

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23