At December 31, 2021, Pinebrook Inc. reported $135,000 in accounts receivable and $9,300 in the allowance for doubtful accounts. In 2022, the company had $875,000 in credit sales and collected $915,000 on accounts receivable. Pinebrook also wrote off $2,500 in uncollectable accounts. The company uses the aging method to estimate bad debts, and management has estimated that the allowance for doubtful accounts for December 31, 2022 should be $8,800.
Required:
a. Provide the journal entry to record bad debts expense for the year 2022. (Ignore information contained in part (b)below.)
b. While auditing the books of Pinebrook, you discover that the company's bookkeeper has erroneously recorded a transaction: for one customer who went bankrupt in 2022, she wrote off the $6,800 receivable with a debit to bad debts expense. Determine the error's effects (overstated/understated)on the December 31, 2022 balance sheet (accounts receivable, allowance for doubtful accounts)and the income statement for the year 2022.
c. In January 2023, the company factored all of its receivables ($95,000)without recourse for proceeds of $77,000. Present the journal entry to record this transaction.

Question

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The Answer of At December 31, 2021, Pinebrook Inc. reported $135,000 in accounts receivable and $9,300 in the allowance for doubtful accounts. In 2022, the company had $875,000 in credit sales and collected $915,000 on accounts receivable. Pinebrook also wrote off $2,500 in uncollectable accounts. The company uses the aging method to estimate bad debts, and management has estimated that the allowance for doubtful accounts for December 31, 2022 should be $8,800.
Required:
a. Provide the journal entry to record bad debts expense for the year 2022. (Ignore information contained in part (b)below.)
b. While auditing the books of Pinebrook, you discover that the company's bookkeeper has erroneously recorded a transaction: for one customer who went bankrupt in 2022, she wrote off the $6,800 receivable with a debit to bad debts expense. Determine the error's effects (overstated/understated)on the December 31, 2022 balance sheet (accounts receivable, allowance for doubtful accounts)and the income statement for the year 2022.
c. In January 2023, the company factored all of its receivables ($95,000)without recourse for proceeds of $77,000. Present the journal entry to record this transaction.