At year-end (December 31), Chan Company estimates its bad debts as 0.40% of its annual credit sales

At year-end (December 31), Chan Company estimates its bad debts as 0.40% of its annual credit sales of $643,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $322 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 the journal entries for these transactions.

Explanation:

Dec 31

To record estimated bad debts expense (0.004 × $643,000) = $2,572