Wile E. Coyote Company uses the allowance method to account for bad debts. In the first year of operations (2019), Coyote sold $740,000 of merchandise on credit; which included a $4,500 sale to Road Runner. 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, Coyote wrote off as uncollectible the $4,500 account of Road Runner; and on December 25, 2020 Road Runner unexpectedly paid his account in full. On the Bad Debt working paper, prepare the journal entries that Wile E. Coyote 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 Road Runner. Previous Next